Pandora and Artist Payments

Have you heard of Donnie McClurkin, French Montana or Grupo Bryndis? If you haven’t you’re not alone. They are artists whose sales ranks on Amazon are 4,752, 17,000 and 183,187, respectively. These are all working artists who live well outside the mainstream – no steady rotation on broadcast radio, no high profile opening slots on major tours, no front page placement in online retail. What they also have in common is a steady income from Pandora. In the next twelve months Pandora is on track to pay performance fees of $100,228, $138,567 and $114,192, respectively, for the music we play to their large and fast-growing audiences on Pandora.

tim-map.jpgAnd that’s just the tip of the iceberg. For over two thousand artists Pandora will pay over $10,000 dollars each over the next 12 months (including one of my favorites, the late jazz pianist Oscar Peterson), and for more than 800 we’ll pay over $50,000, more than the income of the average American household. For top earners like Coldplay, Adele, Wiz Khalifa, Jason Aldean and others Pandora is already paying over $1 million each. Drake and Lil Wayne are fast approaching a $3 million annual rate each.

This revenue stream is meaningful. I remember the many years I spent in a band when earning an additional thousand dollars a month would have been the difference between making music an avocation and a hobby. We’re talking here about the very real possibility of creating, for the first time ever, an actual musicians middle class.

It’s hard to look at these numbers and not see that internet radio presents an incredible opportunity to build a better future for artists. Not only is it bringing tens of millions of listeners back to music, across hundreds of genres, but it is also enabling musicians to earn a living. It’s also hard to look at these numbers, knowing Pandora accounts for just 6.5% of radio listening in the U.S., and not come away thinking something is wrong.

Pandora was founded on the principle of supporting artists and we’re proud to pay performance fees. We think artists could and should ultimately earn even more. But all of this revenue is coming from a single company. A predatory licensing fee orchestrated over ten years ago by the RIAA and their lobbyists in Washington has devastated internet radio. Few now deem it worthy of major investment, including most notably, virtually every major broadcaster. After spending years building an audience, the original three largest webcasters (AOL, Yahoo! LaunchCast and MSN) fled the business after the last rate hike was imposed. This is not a recipe for a sustainable industry. It is a destructive stranglehold that is putting at risk a much larger reward for musicians everywhere.

I believe we can do better, both for artists and music fans. Driven almost entirely by our commitment to this business, internet radio is now the fastest growing form of music listening in the US. And even more encouragingly it has proven to have a positive effect on both music sales and the curtailing of music piracy. In fact, Russ Crupnick, senior vice president of industry analysis for The NPD Group, citing the annual Music Acquisition Monitor study, states, “Overall music purchasing was down in the last year, while the average Pandora listener purchased 29% more music during the second quarter of 2012 compared with last year. Additionally, Pandora listeners’ music acquisition came increasingly from legal purchases, while non-listeners showed a decline.”

Consumers have spoken, and they love personalized radio. It has earned its place in the music ecosystem. It is time to embrace progress and harness this innovation for artists.

Congress must stop the discrimination against internet radio and allow it to operate on a level playing field, under the same rules as other forms of digital radio.

Making performance fees fair for internet radio will drive massive investment in the space, accelerating the growth of the overall sector, and just as importantly accelerating the development of new technology that leverages the incredible power of the internet to build and activate new audiences. That’s where the great opportunity lies in the long run. The short-term reduction in revenue would be rapidly swamped by the overall growth of the sector. Imagine the impact on artists if this industry grew to become 25% or even 50% of radio listening.

Artists, this is your future. Own it.

Rascal Flatts ($670,351), Iron & Wine ($173,152), Bon Iver ($135,223), George Winston ($85,239), Zac Brown Band ($547,064), The Four Tops ($65,173), Ellie Goulding ($609,046), Mumford & Sons ($523,902)…

Tim
Founder, Pandora

Tim Westergren

Founder http://www.pandora.com/profile/tim

78 thoughts on “Pandora and Artist Payments

  1. These artists need to be paid. They are not selling CDs like they used to. You cannot make all you profits off of selling one song on iTunes. Pandora is great, and I know alot of people that use it, but their stocks show that they are not where they thought they would be. I think it will be a gradual change for the better.

    • This is a great post, and it sure sounds unfair to me (though I wonder whether it might be fair for Pandora to pay a bit more than traditional radio, because it’s somewhere between traditional-format and music-on-demand )

  2. Pay what the market will bear. If Pandora users are willing to hear more ads or give up personal information for more targeted advertising, there will be more money to cover costs (artist fees, infrastructure, bandwidth). End user activity and tolerance have an impact in this model on how much is available for the artist.

  3. I love the service. I gladly pay for the service. I believe it is a great value for the money. I’m surprised to find any negative feedback to this message, yet it appears on balance to be unpopular.
    From what I read, the business model is very challenging. Sell too many ads (or turn the volume up more) and you alienate the audience. Charge too much for the service and you drive the audience away. So you end up being confined to a low(er) profit endeavor and watch while others with deeper legal pockets pursue greater profits while dampening diversity in the field.
    Bottom line – as interested, informed and caring fans of music we need to encourage business models that broaden the market and reward the artists. If you don’t think Pandora is accomplishing that outcome then you are certainly justified in complaining. I think Pandora is accomplishing that outcome and should have the opportunity to compete on a level playing field.

  4. This article is disagreeable to characteristic out that they’re doing a immense run for musicians–building a arrangement & income flowing for artists who wouldn’t individual it, and salaried far, far statesman than traditional radio.

  5. I’d bet that there is not a flat rate across the board for royalties paid to artists… So answering the question, “How much do you pay an artist per play?”, may be a bit more complex an answer than could be addressed here.

  6. I love the service. I gladly pay for the service. I believe it is a great value for the money.’m Sure the good quality. The money to pay for his satisfaction. There is nothing better. Good service.

    • Well, just like andy other TV or Radio station, if you don’t like the advertisement content, don’t listen to it.

  7. Curious to know if the artist contract is the same for the free with-ad service versus the paid One service. So far the value to upgrade is not significant enough to me. However, if there was an option to pay more to have some of my subscription pay more directly to the artist, I would do that because I’d feel like I was showing my appreciation directly to the artist. Just a thought.

  8. There are two types of artists. 1) Established 2) New and emerging.
    Established artists are old school and want to dominate with record label companies. But, the digital age has decimated the traditional record label companies niche/business proposition. So these artists are disillusioned into thinking they can still monopolize and deserve higher revenues.
    New and emerging artists are the ones who are using internet radio companies for exposure. This is in hopes of leading to online music purchases and other goodies that come with fame. I’d call them the middle-class artists.
    Basically the ecosystem has changed where the internet radio companies should be acquiring the record companies and artists should then work with these new identities. Consumers should benefit as there are more music and artists.
    But, this transition hasn’t occurred yet so everyone will continue to bicker about lost profits and more revenues. While….and this is the best part…people continue pirating. Pirating is good for the ecosystem as it should be reminding all parties every day that it is there and profits/revenues are disappearing as they continue bickering.

  9. This is a great post, and it sure sounds unfair to me (though I wonder whether it might be fair for Pandora to pay a bit more than traditional radio, because it’s somewhere between traditional-format and music-on-demand )

  10. I love the service. I gladly pay for the service. I believe it is a great value for the money.’m Sure the good quality. The money to pay for his satisfaction. There is nothing better. Good service

  11. And what about the people who actually WRITE the songs you play???? I hear SONGWRITERS are getting paid THOUSANDTHS of ONE CENT for each play of their songs… How do you explain that????!!!! That IS NOT RIGHT!!! Without the songwriters, there would be no music! They should be compensated more fairly! It’s not just the artists who should be paid….

  12. In my case, the artists and songwriters are making more money because of Pandora. When I hear a song on Pandora that I like, I usually purchase that cd. If I like the cd, then most of the time I end up purchasing all the music from that artist. I guess that is why my wife and I have purchased over 1200 cd’s and over 15,000 mp3’s. I don’t listen to radio because of the commercials and very few stations carry the type of music we prefer. So Pandora is our source to hear new artists and their music.

  13. I just wanted to take a minute and say “Thank you” for bringing me great music for a fantastic price. I think the payment I make to be a member of Pandora is the best investment I make every year. My kids tell me I can use it for free, but I think it is important to respect the artists while I listen to great music.

    Thanks for finding a wonderful way to enjoy the music I like and hearing new artists that I would never experiences without your venue.

    Jan

  14. New and emerging artists are the ones who are using internet radio companies for exposure. This is in hopes of leading to online music purchases and other goodies that come with fame. I’d call them the middle-class artists.

  15. I like the service. I would like it to last. I searched for the Pandora website to find if there was still a means to contribute. I would likely to make a financial contribution, It will be modest on my part since I am retired. All the same, it is great to have artists creating music for us all to enjoy. Since ours is a Capitalist society, lets pay.

  16. I still can’t quite afford the fee, but so need music to get me thru! The fee seems SO reasonable and worth it, I’ll luv it when no more adds. Now there are EVEN MORE adds now, and MORE OFTEN. And LOUDER and LONGER! INSIDIOUS. i’m hoping in 6 months. To be Ad-Free and support other artists/musicians is fair and worth it. But longer, louder and more ads now. As usual, when ya gots no flow ya gets no say. How are things re: that piece of legislation regarding industry use fees etc.? Tell em pay up!

  17. All of these services sound the same to me. They play the same music as FM radio and are always interrupting my studying with some commercial. I just found http://www.earbits.com the other day and they are totally free online radio without any ads. It’s perfect music to work to.

  18. So if you have ever asked yourself “What is the fastest way to make money. The real problem is the work that affiliates have to do before they can start promoting the free e – Book that come across and like. Whether you like it or not, the internet is the business weapon of today and it could be your best friend, if you treat it right.

  19. Curious to know if the artist contract is the same for the free with-ad service versus the paid One service. So far the value to upgrade is not significant enough to me. However, if there was an option to pay more to have some of my subscription pay more directly to the artist, I would do that because I’d feel like I was showing my appreciation directly to the artist. Just a thought.

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