Pandora and Royalties

(Warning: This is long, but I’d really like to fully articulate Pandora’s perspective on royalties, which is simply impossible to do in just a few sentences.)

Over 13 years ago when I started this company, we set out with a singular mission: to help connect artists with their audiences and help listeners find music that they love. This led to the creation of the personalized radio service known as Pandora. Today, over 70 million listeners tune in to our service every month, where they hear the music of well over 100,000 different artists. These artists span the entire musical spectrum; from the well-known to the completely obscure, representing every imaginable genre. The vast majority of our collection gets no other form of radio airplay. We are incredibly excited about the new music industry that is taking shape as this personalized form of music discovery takes hold – a future that allows tens of thousands of working musicians to finally reach the audiences they deserve.

There has been a fair amount of commentary lately on Pandora’s approach to royalties – some coming from a deliberate and orchestrated campaign funded by the RIAA, and some coming from well-intentioned artists who, because of this misinformation campaign, have been mislead about Pandora’s intentions. I bear these artists no ill will. On the contrary, they are brave to speak out and articulate their perspective openly. David Lowery, Blake Morgan, Roger Waters, David Gilmour & Nick Mason, and others are all speaking from the heart. And as a long-time working musician myself, I fully understand their emotions and concerns.

While we have generally tried to steer clear of debating this issue in the media, the volume of misinformation has reached a level where I feel it’s important to set the record straight – not only for Pandora, but also for the artists themselves as they consider what, if any role, to play in shaping the policy around royalties in the coming months and years. There is a window of opportunity here to create a healthy and sustainable music ecosystem, but that won’t happen if the discussion is dominated and controlled by entrenched incumbents.

The first falsehood being disseminated is that Pandora is seeking to reduce artist royalties by 85%. That is a lie manufactured by the RIAA and promoted by their hired guns to mislead and agitate the artist community. We have never, nor would we ever advocate such a thing. I challenge the RIAA to identify a statement from Pandora that says we seek to reduce royalties by 85%. On the contrary, all of the key principals including Cary Sherman (the head of the RIAA) and Mike Huppe (the head of SoundExchange) know that we have been advocating for solutions that would grow total payments to artists. The 85% sound bite preys upon the natural suspicions of the artist community, but it is simply untrue. And although we compete directly with AM/FM radio, which pays zero performance royalties, we have always supported fair compensation to artists.

The second confusing and contentious issue is the amount of money paid for each song spin on Pandora. There is a tremendous amount of misinformation being spread on this topic as well.  First we need to clarify what a “spin” on Pandora means. Each spin on Pandora reaches a single person, compared to a “play” on FM radio that reaches potentially millions of people. In other words, a million spins on Pandora might be equivalent to a single play on a large FM station. How much would we pay in royalties for a million spins? About $1,370. (If you’re interested in the detail, an independent blogger posted today some very accurate calculations on this exact topic.) If major market FM stations paid the same rates as Pandora, based on audience, some would be paying thousands of dollars for every song they played.  How much do they pay performers right now? Zero. As Richard Conlon, SVP at BMI recently said: “One play on commercial radio is not the same thing as one play on Pandora.” He is right.

Regardless of the math, the truth remains that any way you cut it, when it comes to Internet radio “x spins pays y dollars in performance fees” is always going to sound like a small number. The total is huge and growing (over $250 million last year alone), but the per spin number is small. Which leads me to the next, and perhaps more important point. The value of a spin on Pandora is about much more than royalties. Over 350 labels actively service Pandora with new releases. And we get thousands of unsolicited submissions from artists. Why? Because radio has, and will always be THE primary means of promotion for artists. Spins means audience, and developing an audience of patrons is THE key to long-term sustainability for artists. Furthermore, in an Internet-connected world, the ability of a service like Pandora to activate fans is extraordinary – far beyond anything broadcast radio has ever been able to offer. We have already begun developing and testing those capabilities, and the artists who have participated in these programs have been blown away by the results.

The next issue concerns the publishing side. Historically, Pandora has paid essentially the same rate as all other forms of radio, a rate established unilaterally by the performing rights organizations, ASCAP and BMI, in the late 1990s. In November of last year, following a lengthy negotiation, Pandora agreed with ASCAP to a new rate, an increase over the prior amount, and shook hands with ASCAP management. Not only was our hand-shake agreement rejected by the ASCAP board, but shortly thereafter we were subjected to a  steady stream of “withdrawals” by major publishers from ASCAP and BMI seeking to negotiate separate and higher rates with Pandora, and only Pandora. This move caused us to seek the protection of the rate, also recently negotiated, enjoyed by the online radio streams of broadcast radio companies. It’s important to note that these streams represent 96% of the Internet radio listening hours among the top 20 services outside of Pandora (talk about an un-level playing field). We did not enter this period looking for a lower rate – we agreed to a higher rate. But in a sad irony, the actions of a few small, but powerful publishers seeking to gain advantage for themselves has caused all songwriters’ royalties to go down. Any characterization of Pandora as being out to cut publishing rates flies in the face of the facts.

One last thing that I feel I need to address. The RIAA has attempted to create a firestorm about an email from me asking artists if they would show their support for Internet radio by signing a letter. We were overwhelmed by the response. Over 500 independent artists stepped forward and agreed to sign. The intent was simply to communicate directly with artists about the future of music, and allow their voices – the thousands upon thousands not represented by the RIAA – to be heard, and to play a part in an issue that so directly affects them. Many of these artists have a completely different perspective from the RIAA on what’s right for them.

We did not play these conversations out in the media, and out of respect for the artists, we kept the dialogue private. When the letters were leaked to the media, we became concerned about potential intimidation of these artists (many were forbidden to sign by their labels, or spoke to us about fear of reprisal should they sign). Because of these concerns, we went back to all of them and offered to take their names off the letter. Very few did.  In fact, the list actually grew, and continues to. Out of respect for each artist who signs, we have promised to keep their names private and out of the media fray.  But we stand by those letters, and you can read them here to decide for yourself.

As I said earlier, there is a window of opportunity for recording artists and Pandora to come together around a mutually agreeable rate that will ensure a healthy and vibrant future. We are committed to the challenge of building an ad-supported business for consumers, and to do it bearing a substantial royalty cost, but just as we must honor and value the role artists play in providing the music for the service, so the artist community must also value the years of effort, investment, and expertise that has made Pandora such a massive driver of artist exposure in the music ecosystem. Such an outcome will only be reached if the debate is based on real evidence and real impact instead of emotionally satisfying but hollow talking points that do nothing but mislead, and worse, misguide the policy prescriptions for artists.

Pandora is a company founded by artists to help artists.  It is at the core of who we are and how we make decisions about our business and that will never change. We will not be intimidated. We will continue to try our best to stay above the fray and concentrate on our mission to create great Internet radio for our listeners and our artists.  We are undaunted, and we are passionate about the future of music, and an ecosystem that allows those who create it to thrive.

Tim Westergren

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

82 thoughts on “Pandora and Royalties

  1. Well written! Why not set up an info station? Sort of a pre-recorded forum so we can hear artists and pandora’s views in a sort of civilized talk show format?
    I love Pandora!!!!

      • It’s Muzak? You mean the company that charges retail and business outlets to pipe badly made synth cover tunes into public spaces?

        I have heard a number of covers on Pandora fortunately nothing as bad as what Muzak sells. I hear real songs by real artists often with real albums and merch for sale all linked from the screen my device is playing on. I have yet to want to buy much less be provided with incentive to buy any Muzak while I was trapped in an elevator.

        Perhaps you mean another company or perhaps you like comparing apples to oranges randomly in a desperate hope to simultaneously sound relevant and make the OP sound dumb.

      • “Every artist should pull their publishing in protest.”
        Artists almost never own their publishing. Learn, then speak.

      • So, you think that Muzak is the same as Pandora? Is the battery in your hearing aid gone dead?

        I “tune out” Muzak out of neurological reflex. To me, Muzak is NOT music. I’m still trying to figure out just what it is – and have not, so far.

        On the other hand, Pandora provides an a la carte music menu of the listener’s choosing.

        As Jazz lover (as well as a Rock lover) I get to enjoy the music that I want to hear; as opposed to having to listen to someone else’s idea of what they THINK I might want to hear. Example FM radio.

        As Tim Westergren states, AM and FM radio pays no royalties at all to copyrighted materials, so why do the likes of Pink Floyd, and others, have a complaint against Pandora? How much is enough for these multi-millionaire musicians? And, as for “The Pink”, perhaps “Money” has become a self-fulfilling prophecy.

      • I work in hotels. I have zero relation to Muzak. But I will say it’s obvious you are leaning on a 1970′s stereotype and haven’t heard them in a long, long time. It’s all good. People love to have opinions about things they know nothing about. lol

      • If Pandora is muszak Jimmy, then its because YOU created the muzak playlist you twit! Your ignorance sir, as the great Milton says, almost subdues my patience.

      • Dont worry dude: these people are just so terrified at the thought of losing their free music….heaven forbid anyone go to the record store and buy some of those new underground albums from that hot young band the genome,,,hahahah, bunch of cheapskates.
        if you care about independent music, go to the show when they come to your town and buy a t-shirt. or better yet, start writing to companies and suggesting they use your favorite genetic gnome track (its still just as funny: its a miracle, the genome!!! science gone haywire!) in their next car commercial because those are the only ways these bands make any money. I’m diggin all over trying to find some actual numbers from these guys and what do you know? nowhere to be found.

      • Just for the record, I have in fact worked for Muzak in the past for about 5 years. It was actually one of the best jobs I ever had. The gross misconception among the general public that Muzak is just dull instrumental “elevator music” is so far from the truth that its staggering. Muzak is actually a music service that utilizes Dish Network satellite dishes to provide over 130 channels of any kind of music you can think of. From hard core metal to contemporary Christian, Hip-Hop to Big Band and everything in between. What you “normally” hear is whatever the store owners decide to put the receiver on and therefore should not reflect on the company that provides the service any at all. So, even though i feel like you were trying to make a slandering comment towards an awesome company, you accidentally made a pretty rational statement. Pandora and Muzak are fairly similar, they both provide a service that pumps out any kind of music you might want to hear (with some exceptions obviously, no company is going to be able to provide everyone everything they want.), the major differences are that Pandora streams over the internet and Muzak uses satellite, and Pandora is primarily used for individuals where as Muzak is designed for Public consumption, and pays ASCAP and BMI as such. Sorry for the lengthy response, it just gets to me sometimes to hear everybody bash Muzak when they are in fact a great company providing a great service and are portrayed in a bad light because of what they’re customers choose to listen to.

      • Muzak???? You must be programming the wrong stations… you do realize you decide what you listen to on Pandora don’t you? Don’t you?

    • Moderated talk discussion sounds worthwhile. You ight want to set some times for different subjects.
      I discovered pandora two years ago, after 60 years of avid listening and being involved with two bands. Pandora changed my life. It opened a whole new knowledge of artists and composers, bands and styles.
      I like mostly classical and jazz, with show tunes and dance music. There are so many things that haven’t even been tried yet. Tim is just getting started.
      New is always panned by the established, especially if their customers are getting what they want from a new source.

    • The current overhead to profit ration of personal internet radio companies (i.e. Pandora, Spotify, Itunes) is incomparable to AM/FM stations. Moreover, the nation-wide range of transmission and ability to appeal to a diverse range of listeners by offering music from every genre is diminishing the ratings and revenue of AM/FM broadcasters. Pandora profited over 300 million dollars last year, but it will never be enough, since every corporation must be obsessed with growth in order to maintain the interest of investors (stock doesn’t increase in value if there is no growth), which leaves little room for loyalty to musicians. Being a music lover, I feel that it is important that we ensure that musicians have the incentive and financial ability to devote themselves to their art. With the recent failed effort of Soundexchange to procure decent mechanical royalties, I think that musicians, songwriters, producers, publishers, and recording labels should combine their efforts and resources to create a nonprofit internet radio company which pays out all net profit as royalties. Musicians would gladly submit their music and promote the company since it would be the most profitable means for them to get through to an online-audience. A nonprofit company could employ volunteer interns to categorize music and create a genome. Pandora currently gets a larger share of the profit than artists do and must pay taxes on over $300 million of revenue per year, but in a nonprofit company, this would all benefit people who actually had a hand in producing the music rather than shareholders, and the seemingly useless Soundexchange could be cut out as well.

  2. I’ve always enjoyed Pandora mostly for the more independent released tunes, that it puts out through the genome. Hopefully now that you guys have purchased terrestrial spectrum it will allow Pandora the same royalty rights as iHeart, which aside from the ability to reach terrestrial stream, is inferior to what Pandora offers(repetition on custom channels far exceeds Pandora). I’d love to see Pandora work even more with thethe

  3. I’ve always enjoyed Pandora mostly for the more independent released tunes, that it puts out through the genome. Hopefully now that you guys have purchased terrestrial spectrum it will allow Pandora the same royalty rights as iHeart, which aside from the ability to reach terrestrial stream, is inferior to what Pandora offers(repetition on custom channels far exceeds Pandora). I’d love to see Pandora continue to do more advance listenings of albums and further leverage itself as place to go for independent labels/artists and releases…and oh, by the way, while here we can also tune into the more commercial side of the industry. Might provide a lift in tsl and translate into even more subscribers. Providing even more value in the eyes of the industry and advertisers. Love the P!

  4. Pandora is not advocating a drop of 85%, it is “advocating solutions that would grow total payments to artists.”

    This does not confirm that you are not trying to reduce the rate of payment to artists, only that you are not reducing by 85%, and that in being an active growing company, you will pay more in “total payments to artists.”

    It could be read this way; more total payments to artists by way of a larger pie made up of greatly-reduced individual payments.

    The next point is the same radio made decades ago to make zero payment to artists, and is rejected by most now: “We give them a platform…”

    That is no gift, it is the partial incentive to put your music there, along with royalties. It doesn’t fly any better now than it did decades ago when it was forced upon artists.

    No doubt you explained during the $200+ Million offering that you could generate significant income with rates as they were currently structured.

    You likely convinced investors that you were capable of competing with the current rates.

    Why the change of heart now that you have the $200 Million?

    Would you not be better served by joining with artists to force the increase of payments by radio and satellite to a more payment, than to reduce the payments being made now in your effort to be “more competitive.”

    Imagine your future marketing as an ally of the artists, rather than as “management” in a labor dispute.

    Kevin Rose (Digg) well understands how impossible it is to recover fickle members once lost.

    • so what’s your point? that Pandora should unilaterally offer higher payment rates to artists? and what do the artists unilaterally give to Pandora in return for that better payment?

    • Richard, I think you miss the point on your last comment about making satellite and terrestrial radio increase their payments. While that may be the utopian solution, its also an up hill battle which one company alone cannot win – it requires changing legislation which was originally lobbied and put in place by a conglomerate of companies on the other side of the argument with far greater resources. Leveling the playing field for equality is the first step. Once that is accomplished, then Pandora can work from within the system to change it and has a stronger voice to do so.

      • My main point is that this is all cover for what they are actually doing, which is trying to lower their payment to the artists who create the music which is the sole reason they have this platform.

        I already pointed out the fact that while he says he is attempting to pay artists more, that is cover for what he is actually trying to do, pay them less per play than he is paying now.

        The only way he wants to pay “more” is by growing his business, and admirable goal, but it is to be done on the backs of the artists by lowering their per-play amount.

  5. If you and your company are so “cool” and cooperative towards artists then why did your company issue this statement that appears to be an outright lie as to what I said in my blog?

    “Mr. Lowery’s calculations grossly understate Pandora’s payments to songwriters. In truth, Pandora paid many times more in songwriter royalties to play the song referenced in his article.
    Read more at http://venturebeat.com/2013/06/26/pandora-responds-to-pink-floyd/#0RliP333lIAHbMHy.99

    I did not grossly understate the royalties paid to my co-authors as your company has claimed. The total amount netted by the three songwriters is $42.225. I have their statements right in front of me. In what through-the -looking-glass-world is the actual amount paid to the songwriters a gross understatement?

    Further I have not been fed lies or misinformation from the RIAA, Communist Party, Trilateral Commision, The Blue Horse at the Denver Airport or some other real or imagined bogey man as you just suggested. I’m an independent thinker, a former mathematician and computer programmer. I arrived at my conclusions and opinions by carefully examining royalty statements, SEC filings and reams of other data.

    If you want to have an honest conversation with artists you should start by not insinuating they are liars or helpless creatures who or easily misinformed.

      • David Lowery calling out Pandora on this is like have Pravda speak about democracy in Russia. Lowery’s article comparing amounts paid by Pandora and broadcasters is fiction; and if he is “a former mathematician” he has forgotten the rule of Cumulative Addition when equating a payment from Pandora with payment from broadcasters (the latter being an incalculable number if trying to compare “per spin”).

        I wrote a response to Mr. Lowery, only to find that he does not post responses on his web site that reflect the truth when it is in contrast to his RIAA based spin on this subject.

        Still “awaiting moderation” on his web site are these words, posted June 26, 2013 at 6:53 pm:

        “Artist’s Expectations Need to Change, Too”

        “In one passage, Mr. Lowery states: “For you civilians webcasting rates are ‘compulsory’ rates. They are set by the government (crazy, right?).” Yes, that’s exactly what was argued in 1998, 2001, 2005, 2009, and is still being argued today with no support from broadcasters (until it became apparent they would be asked to match the amount). The problem is that if it were not set by the government, Mr. Lowery would find his music’s worth close to zero today, due to the economics principle of supply and demand.

        Times change, such that we do have an out-of-whack system for musicians to make money. But it’s the reality of today, to be accepted or challenged – and I have no problem when it’s challenged as long as the “challenge” applies equally to all music-based businesses. In Mr. Lowery’s case, it does not.”

        The full article is at http://www.audiographics.com/agd/062613-1.htm

    • David,

      I think you are conveniently forgetting to mention the amount that your chosen publisher takes before you are paid (which is over 50%). If you follow the math, Pandora paid over $1,300 in royalties for your million spins, and $97 to you, your fellow songwriters, and your publisher. In either case, it qualifies as “many times more.” Here is a link to the math:

      http://theunderstatement.com/post/53867665082/pandora-pays-far-more-than-16-dollars

      All for the equivalent of a single FM radio station play.

    • David,

      The reason why Pandora exists in the first place is because the recording companies that comprise RIAA are not adequately offering your music to the people who want to hear it. That is a simple fact of markets. If the RIAA adequately served you as an artist, nobody would have any interest in listening to a third party.

      Pandora is offering you less than you feel you deserve, partially because of the RIAA’s choice to treat Pandora as a hostile entity. If RIAA wanted your music to be fairly distributed to the market that you seek, then they would make every effort to pursue an effective partnership with Pandora.

      You have somehow gotten lost in the weeds on this one. Dollar for dollar, what you get paid and by whom is irrelevant. The fact that your music WILL absolutely fade into obscurity under the watch of the old guard, and that those like Pandora COULD give your work the immortality that might deserve, is what matters most.

      • Define “adequately”.

        Anyone wants a copy of any of David’s albums can easily buy them in a heartbeat.

        Is this “inadequate” because the price is not “free”? The music us readily available, instantaneously, to anyone who wants it, anywhere in the world. It’s also available to free to the consumer on Spotify and Pandora.

        We clearly have different definitions of the word “adequate”.

        And based on his records, he’s actually played *more*, not less on terrestrial radio and satellite, so it’s very much available there as well.

        (Not to mention, unlike Pandora and Spotify, both of those outlets have been proven to drive sales.)

      • A fair market price is the price the market is willing to pay. Mr. Westergren is asking that that Congress step in and lower the market prices because he doesn’t like them. Terrestrial radio succeeded at this in the past, and musicians are still hurting from it. We’re not going to allow the new system to be as bad or worse than the old one. It’s just not going to happen on our watch.

  6. Keep up! I love Pandora, you guys change my life in a better way with music, I so much enjoy your music and different artist that didn’t know they existed…. Thanks for creating Pandora, is the best ever than normal radio!….

  7. tim, i have been a pandora fan for years – you actually personally replied and sent me a t-shirt in the start up days – and i still support your company vision to this day. anyone with half a brain who looks at the RIAA and labels in comparison to the artists themselves will realize how heavily weighted the system and payments are to everyone but the people actually making the music.

    it’s sad. and many great musicians have not been able to continue recording or performing because of it.

    i appreciate you continuing to keep pandora a fantastic experience and work for the artists. the amount of new music i’ve personally discovered on pandora is staggering – far more than via FM radio – and i’ve purchased more music because of your service.

    keep it up, Tim, and keep fighting the good fight.

    • Mr Westergren us currently cashing in to the tune of $1M a month. How is that arrangement not grossly weighted in the favor of management and “the middleman”?

      At $1M in personal income a month, you can hand out a lot of free T-Shirts. That does not make a person a freedom fighter or a friend of artists. As Mr Lowery says, “Meet the New Boss — Worse Than the Old Boss?”

      We’ll have to wait and see. If Mr Westergren wants to join artists in making terrestrial radio pay a more sustainable rate, and work to ensure that Pandora drives album sales instead of cannibalizing them, then musicians would welcome him with open arms.

      He decided to do the opposite.

  8. Thanks to Pandora for not only delivering a great selection of songs but doing so with non-intrusive ads and giving us more control over what we want to listen. Your ranking system is nice and your stations are very accurate by playing songs that matches my taste.

    Thanks to Pandora I have discovered artists that are great but due to red tape they haven’t made it mainstream yet. I see why the RIAA and some radio stations may be scared, because they should. We have more options these days and do not have to settle for what very few wants us to listen. Thanks to Pandora I can drive to work listening a wide variety of songs without having to either spent 98% of my commute listening to never ending talk shows and 50 commercials per segment or listening to my CD over and over again. Kudos!

    • The reason that Pandora’s ads ate unintrusive is that they’re keeping them that way for now to gain market share.

      Currently, their profits are not good. They have three choices here:

      One is to raise revenue by selling more ads. This is what terrestrial radio does.

      Another option is to raise revenue by charging subscriptions. This is what Satellite radio does.

      The third option is to cut costs by lowering pay and reducing the number of jobs that offer a living wage. That’s the one that they went with. In my opinion, it’s the most vile and Walmart-like of the three, and eats at the middle class of musicians.

      (Of course, they could also cut CEO pay and VP salaries, but who are we kidding? They’re just like the old guard in that respect. Potentially, worse. We just don’t know yet.)

  9. Great piece. Glad to be hearing such fervor in your post. This will be a long fight as there is billions of dollars at stake. However, I truly feel Pandora is on the right side of history while the industry attempts to cling to every ounce of power they have left.

    Best of luck.

  10. Thank you for this well written explanation. I hope you are able to come to an intelligent compromise on this issue. There is a lot riding on the precedent it will set. From this post, It sounds like you have good intentions, as an artist yourself, I believe you do. Best of luck!

    • I hope for an intelligent compromise too and hope that Mr Westergren stops his attempts to ask Congress to step in to these nevotiations and smash musicians’ bargaining power. As a former musician, he must know what that looks like.

      Even if his intentions are good, you know what they say about those and the road to hell.

      If Mr Westergren were honestly negotiating with artists instead of running to Congress to ask for special favors (or to cement the worst excesses of the old guard into the new millennium) then artists would be much more likely to believe that he was interested in true compromise.

      At the moment, that’s a hard sell.

  11. Tim I would certainly wish you all of the best!! We all need music and Pandora’s intention to create great Internet radio for all listeners and artists should be heard…

  12. I haven’t purchased music in more than 10 years, but because of Pandora I bought over $25 in songs from artists that I liked on Pandora. Therefore, I would have to agree that “Pandora is a massive driver of artist exposure in the music ecosystem.”

  13. Pandora has introduced me to so much new music I would have never found on my own. The economics of playing those songs I have no opinion on, but I will tell you that the service has inspired me to see artists in concert in large and small venues, buy cd’s right there on the spot and maybe even a T-shirt. This part of the music economy can’t be ignored.

  14. Pandora is the only music service I use now, even in my car. I get exposed to music I never would have on the horrible clear channel radios stations in my area. I have purchased about 40 albums over the past two years all due to the fact that I heard them on Pandora.

    Pandora is the most effective music marketing I’ve seen in over a decade. Artists trying to hamstring it by demanding absurd royalties is like cutting off your nose to spite your face.

    Speaking of using Pandora in the car….I would love to see a driver friendly mode for the Android version. Less album cover, bigger artist/title/song text and larger, easier to press buttons.

    Keep up the great work!

  15. @Tim Westergren & the entire Pandora team

    Haters will ALWAYS hate what they dont have, keep up the good work and drive of passion, they will at some point give up on trying to break the focus….

  16. FWIW: there are a couple dozen artists I have discovered through my paid subscription to Pandora that I love, and I have expressed that love by buying several of their albums each. I can’t and won’t presume to tell an artist that Pandora is a good deal on the basis of my experience, there are certainly trade offs. What I can say is that for at least these artists, their income BECAUSE of Pandora isn’t all captured in their performance royalties. Artists and their representatives are going to have to make the choices that they think work for them about the trade offs here, but I want to thank the artists for sharing their music in this way in the past, and for Pandora for introducing me to them.

    • Why would the artists be happier with Apple’s iRadio?

      “Apple won’t have to pay royalties for some performances of songs that are already in listeners’ iTunes libraries, or songs that might be on an album that a listener owns just part of. Similarly, “Heat Seeker” tracks selected by iTunes for special promotions, are also exempted. Apple also doesn’t have to pay for songs listeners skip before 20 seconds have elapsed.”

      • They won’t be happier, but that won’t stop Apple from crushing Pandora. Apple will absolutely negotiate lower royalty rates than any other streaming service with terms that are grossly unfair to everyone but Apple. And they will do so by making agreement to such terms mandatory if you want your songs sold on iTunes at all. The dominance of iTunes means Apple can write their own ticket on iRadio, and no one will benefit but Apple.

  17. Pandora has helped me discover artists that are not available on radio. In many cases, I bought albums or paid to attend concerts of these new-found artists, specifically because Pandora exposed me to their music. That revenue, although completely unattributable to my Pandora subscription, is nonetheless revenue that would not have been generated by the traditional music industry channels. Unless you are a fan of the 5 or 6 pop artists continuously promoted on radio, then that medium if worthless. Unlike mainstream radio, Pandora has given unknown artists a chance to be heard and build a fan following. Bravo Pandora!

  18. Mr Westergen,
    Your post is interesting, although there are some inaccuracies within your claims, based solely on the information within this post. I know you want to end the misinformation and make your case clear, and although I do commend that, I have to point out to you that you, and this post may be a cause of some of more misinformation and more confusion for your customers, artists, etc.

    The point(s) that I am referring to are about the royalties paid by terrestrial radio stations. It is 100% false to claim that terrestrial pays ZERO in royalties. Although I know this from my time working in radio, I will point out to you that later on in your post you explain how terrestrial radio pays royalties to publishers. Something is more than ZERO, therefore based on your own words in your own post, you are incorrect with one of those claims as the two claims when put together contradict one another.

    Aside from that, terrestrial radio, as you have said, is a poor comparison to Pandora, as it is for an audience of only one user/subscriber (there is the possibility of there being more than one listener though), so why do you continue to reference it in your arguments? If something is a poor comparison, it is a poor comparison. It would help you to make things clearer from your end if you didn’t make arguments based on poor comparisons – those kinds of arguments tend to not sway people, and instead come off as though the person making the argument isn’t being honest.

    Although an independent blogger crunched some numbers, and you claim they are very close to the reality of Pandora’s royalty payments, you really need to release that specific information. How much Pandora is currently paying in royalties per play, or per 1000 plays, and what you would like to change that rate to, is vital information within this debate. Yes I am sure that is a difficult thing to post, as I imagine that there are different royalties for different content providers, but still it should be done. Without that information, no one from artists to your customers will be able to judge how and if Pandora wants to pay a fair amount for the music it carries through it’s service.

    Until you can provide that information, you will not be winning any arguments over this. Trust your customers, stock holders, content providers, and the general public as a whole with those specific details, and you just may be able to find an end to all of the bad PR Pandora has been getting recently. Failing to do this, on the public scale will only make this unease continue and possibly even get worse. Personally speaking failing to provide me with that information will make certain that I not only never utilize your service, but that I will never become an investor through a stock purchase either. When it comes down to it people as a whole like to be trusted, they like to know how the companies they support work to some extent, at least in the sense that it is operating in a manner that they believe to be fair – to not release the specific information about royalty payments per play or per 1000 plays, does the exact opposite of that.

    • Michael:

      You need to go back to radio and question what stations pay. You are confusing payments to BMI, ASCAP and SESAC with copyright performance royalty payments mandated by the Copyright Royalty Board. The former is paid by radio stations. The latter is not paid for over-the-air broadcasts; and it is the latter that Tim Westergren is referencing.

      Here’s the difference: BMI, SESAC and ASCAP fees are paid to publishers, composers and in many instances labels (when they own those rights). Copyright performance royalties are paid to Soundexchange – the sole collecting agency for these fees. SX is charged with distribution of these monies in the following manner: 50% to the label, 45% to the main artist on a song, and 5% between backup singers and musicians.

      Here’s your kicker. Soundexchange gets to keep any funds it collects that are not retrieved by the artists they are owed to. At best, SX gets to sit on that cash, collecting interest, while it goes through the motion of acting likes it’s attempting to contact artists. At one time there was a list of over 6,000 musicians waiting payment. Some major acts were included on that list. This listing was online at one time at http://plays.soundexchange.com/jsp/unpaidArtistList.jsp, but has since been removed.

      No broadcaster in the United States pays performance royalties for over-the-air play. Fact: Only 5 counties DO NOT pay these – Iran, North Korea, China, Rwanda, and the United States (http://www.washingtonpost.com/wp-dyn/content/article/2010/04/23/AR2010042305059.html).

      Because of this, due to a reciprocity of payment clause, U.S. artists who have their music played in countries that do pay a performance royalty for over-the-air play do not receive performance fees from airplay. Example: If Adele’s song is played in the U.S. (on broadcast radio) she receives no performance royalty payment. To balance this, if Taylor Swift’s song is played in the U.K. – despite the fact this fee is paid there – Swift will not receive a performance royalty for airplay.

      You are simply wrong in your statement “It is 100% false to claim that terrestrial pays ZERO in royalties. Although I know this from my time working in radio…” You owe Tim Westergren an apology.

      • Curious as to how my statement was incorrect and how I owe him an apology, all I did was point out a contradiction in his post and state that he needs to be less contradictory if he wants to be clear in his argument. I think you need to read my post again and consider what I wrote, instead of changing the subject to how other companies/institutions are the reason for this mess.

        I will repeat myself, step by step for your reconsideration.

        Tim Westergren wrote in this post that terrestrial radio pays ZERO royalties. Is this a true statement on my part or not? I see it as true as it is in black and white on this very page.

        Tim Westergren a couple of paragraphs later goes on to explain generally how radio pays publishing royalties. Is this a true statement on my part or not? I see it as true as it is in black and white on this very page.

        How does an industry that pays ZERO royalties, also pay publishing royalties?

        These are two of his points in his post, two points which are contradictory to one another. If Tim wanted to be clear he would have not made the claim that Radio pay ZERO royalties, and instead maybe wrote something like, radio pays one of the two types of royalties for broadcasting music, unlike Pandora which pays both.

        Something is more than ZERO – this is just a basic fact of reality. The two statements cause confusion because they don’t make sense when put together. He was trying to put an end to misinformation, yet he wrote misinformation when he wrote that radio pays ZERO royalties. To claim otherwise I would say is just ignoring what a contradiction is and the meaning of the word ZERO.

        The truth is that Tim Westergren is not addressing the core issue of all of this and is side stepping at every opportunity – that being what Pandora currently pays per stream, and what it wants to pay per stream. It is faulty logic on his or anyone else’s part to think that what one industry does dictates what is fair for a separate industry – even if both industries are dependent upon the same source for content. Tim is relying on changing the subject and reducing this down to a “this isn’t fair for Pandora or it’s users” argument. None of which has anything to do with how much is a fair payment to his content providers.

        If as you say I need to go back and work in radio and think about how they pay artists, then you need to go back to elementary school and brush up on your reading comprehension and basic logic (as nothing you wrote had much to do with my post).

      • The fact that AM/FM radio pays no mechanical/electronic royalties due to the long standing reason that “it helps promote the artists” is the same field that Pandora wants to be on. The field has to be leveled because Pandora also helps promote artists. There is NO reason why Pandora should not have the same deal. As far as SoundExchange is concerned, they claim royalties should be paid not only to artists but also to those who played on a session. I believe most session musicians get paid already. Finally Sound SoundExchange also is holding back millions of dollars to artists they claim they can’t find? Put Pandora on a level field.

    • Michael:

      You sure got me on that one!

      Folks like yourself who wish to focus so narrowly on innocuous points, instead of addressing the main issue, are not worth the time of response, usually. Nor will you be again. I just want to clarify your statement that I need “…to go back to elementary school and brush up on your reading comprehension…”

      You might follow your own advice, as the comment was not “If as you say I need to go back and work in radio and think about how they pay artists…” The correct statement, which you can check above, is “You need to go back to radio and question what stations pay.” It was said only because of your need to mention “I know this from my time working in radio…”

      Beside not understanding the basis of this conversation, comprehension doesn’t appear to be your strong suit either.

      You have a good one, and try not to be so angry.

      Best wishes,
      Ken Dardis

  19. Pandora would do well to work with other Internet radio operators to establish a system, or agency, where artists can easily opt out of the present systems dominated by RIAA, Sound Exchange, ASCAP, and others, so that they can obtain the FREE promotion of their work that Internet radio offers and that is vital to establishing, or maintaining their careers.

    ALL radio play is promotion, FREE PROMOTION.

    As it is, the entire system is corrupt with parasites that claim to represent the artist’s best interest… But do they really?

    Any manufacturer of products knows that they must purchase advertising to promote their products if they expect to be successful… Music is just another product. For artists to expect that radio companies should pay them to promote their products is insane. Exposure drives sales. No exposure. No sales. Payola is proof of the value that record companies place of having exposure.

    The argument that radio stations benefit financially from playing popular music and therefore must pay for using it is specious. How about that radio stations charge artists for each spin for promoting their music? Sound crazy? Then why have record companies spent millions on “pay for play” campaigns?

    Artists really need to ask themselves what is more important? The tiny checks from rights agencies that pay their executives millions on the backs of artists, or the free promotion that they would enjoy if the parasites feeding off of them were removed and Internet radio operators were allowed to thrive and were free to promote artists’ music.

    It must be recognized that nearly all Internet radio operators do what they do for the love of music; it’s certainly not because of money. Most pay out of pocket to maintain operations, it is not a business model that makes money. And why not? Crippling royalties. Royalties that artist never see because of a corrupted system put in place by parasites that won’t even let the artist see the books so that they can determine if they are being paid their fair share.

    What you never hear successful artists that complain about their royalty checks ever state is how much the rights organizations and record companies siphon off for themselves before cutting the artist’s tiny check… All without any level of transparency. Yes, artists are getting screwed, but it’s not by the radio stations that are promoting their music.

    Artists must recognize that in a highly-cluttered digital media universe, getting noticed is harder than ever and that everyone now has the tools to create not just music, but every kind of media. And that the most important tool that EVERYONE now has is the tool to freely and easily distribute their creations, the Internet. The present system controlled not by artists, but by parasites claiming to represent them, prevents artists works from being freely promoted on the Internet… What sense does this make?

    It’s time for artists to realize that their music is their marketing tool to promote their live performances, but more importantly, to help establish a fan base that will attend their performances.

    Any artist that believes they will get rich selling digital downloads is living in the twilight zone. Live performance is where the money is in the 21st Century. Deadmau5, a DJ/Producer, is getting $450,000 a night to play a nightclub in Vegas, the Rolling Stones are charging $600 per concert ticket! Fighting over getting pennies for spins is ridiculous… Artist should just be glad that someone is willing to promote their music.

    As far as consumers go… Music is FREE! Record stores no longer exist for a reason… There is no money in selling music. But FANS will pay artists plenty to see them perform, or buy their merchandise.

    Yes, a few artist still profit from music sales, but how many? And by how much? How many albums sold a million copies or more in 2012? Just 10!

    Artists should learn to operate independently and run their own businesses and sell their own creations, just like everyone else who produces a product. Even porn stars have learned how to do this; why not musicians?

    The music business has changed… get over it!

  20. It’s very interesting to me to see the parallels between what record companies are saying about streaming radio and what publishers are saying about e-books. In both cases the technology has changed the game in favor of both the producers and the consumers of media, and against the publishing conglomerates.

    • +1. Old money hates losing its cash cows.

      I too have bought lots of music after discovering it on Pandora, music I *certainly* would not have come across any other way.

      • Same here, as Pandora keeps putting new music in my lineup, there are alot of songs I have purchased so I can play them whenever I want on my cellphone and motorcycle MP3 player.

  21. Tim, I thank you for creating Pandora and trying to step into the 21st century with alot 19th century politics to fight through, should you ever need my signature or vote, it’s yours.

  22. Mr. Westergren,
    As a music fan, it seems to me that the crux of the issue is that you are making millions upon millions of dollars while paying the artists pennies (and attempting to reduce those payments in a substantial way).

    Comparing Pandora to FM, AM, SiriusXM and other streaming services might make you feel better/justified about what Pandora’s doing, but at the end of the day you can’t claim to be on the side of artists while trying to undercut them.

    Also, it’s pretty obvious that your employees are spouting talking points all over the comments. If you were unaware that that’s not cool, fair play to you…but that’s still not cool.

    Good luck with everything.

  23. So let’s see…I couldn’t find Tim’s salary on their SEC filing, but I do see that the Pandora CEO is making $8.7 Million in 2013 personally. How ’bout it Tim, how much are you making?

    This dialog should be about paying artists a fair wage for the work/art they provide. It shouldn’t be yet another story of guys getting rich off the backs of musicians. Be honest with us.

  24. Pandora is the best thing to happen to music since the electric guitar. I rarely listen to broadcast radio any more. (I can’t stand the moronic DJs and annoying commercials.) I’ve discovered new artists on Pandora and purchases disks to support them (and get more of their music). I support Pandora as a paying subscriber and I support my favorite artists with album and concert ticket purchases. Pandora good for artists and listeners and the music genome project is pure genius.

  25. Everyone, please slow down. Do you remember life before Pandora? It was peaceful, bland and controlled. You got your music as served. There was no alternative menu. Pandora came along as a fresh concept, an innovative idea, and the use of new technologies. The music industry was not prepared or inclined to have ‘thought outside the box’. I am sure they have all said, “I wish we thought of that.” Pandora has merely upset the status quo. And for me, I am glad they did.

  26. Well written, Tim. I’ve been a die-hard fan of Pandora since the beginning (I even still rock the free Pandora t-shirt you sent me so many years ago simply for sending you a note of support), and remain so. I’m happy to see your positive tone and reverence for doing good for the music industry vs. fleecing it like so many others do has remained intact through the growth of your company.

    Outside of iPhone and MacBook, Pandora is still the product I use most and one of the brands I love most. Keep up the great work.

  27. It’s still too early to tell, but I suspect history will look much more kindly on Pandora (in particular, and streamed services, in general) than any part of the way this industry operated all through the last century.

    Part of the problem is that too many artists are lamenting a state of affairs that is gone for good. Quick, raise your hand if you are a consumer who longs to return to a time when you coughed up $18 for a CD that only had one song you liked? Or when your outlet for discovering new talent was reliant on FM radio or the myopic (and easily influenced) tastemakers at rags like Rolling Stone? How much new talent, for that matter, had a prayer of finding an audience since most of the gatekeepers were suits–myopic old dudes who could care less about musical integrity if it portended less profit?

    How many artists really wish to return to the bad old days when rapacious record labels held sway? The disgraceful treatment of too many musicians is the ultimate legacy of the old guard. Now any artist at least has the potential to reach an audience, and Rhapsody is helping, not hindering that reality.

    It’s more than a little ironic (and pathetic) that a band like Pink Floyd will cry foul at what Pandora’s founder makes, but had no qualms fleecing fans with astronomical ticket prices on their retirement tour (insert too many other acts to mention –cough, Rolling Stones– here).

    The potential exposure all musicians have now was literally unimaginable a decade ago. If you can reach, but not maintain, a potential fan, look in the mirror, not at what you feel an innovative company like Pandora owes you.

    Living in the past (especially a paradise that never existed) might be satisfying in the short run, but is the surest way to get lost in the dust left behind by progress.

  28. Very well said and written indeed. I am a huge fan of Pandora in every way and couldn’t be more grateful for its creation. No radio station has the extensive capabilities as Pandora. Pandora is the purest of genius, for it has instrumentally brought light back into my life.

  29. Why does David Lowery’s statement show that he made less than $17 on more than a million plays? This blog says it should be $1370. Why such a big difference?

    • Brent, Pandora may pay $1370 for a million individual plays, but there’s a lot of other groups and people that get parts of that. See the calculations linked in the article for how that all works out.

  30. Not sure how I feel about the royalties situation – but Pandora, PLEASE, can you get somebody else to write the artist bios? ROVI is horrible and I continue to find writeups that stoop to snide insult and half-baked history. Click a fe random bios and, if you have any music history sense at all, the problems become crystal clear. These artists deserve respectful and properly informed music criticism, not ROVI.

  31. Hey Tim -

    Your last post [Pandora and Royalties] was freaking awesome. I have gone ahead and added your stuff to my Feedly account. Please keep me updated if you post anywhere else.

    Keep rocking –

    Jon

  32. I’ve read all the posts and the blogs. But, the issue is just as muddled (for me) as it was in the beginning. Each side makes their figures stand up and dance. I want to be able to listen to Pandora, and musicians should be paid a reasonable rate. There’s no reason the two sides can’t reach a compromise.

  33. I enjoy Pandora and its a great way to hear some music that I have not heard which sounds good to me. I also like to read the bio on different artists, very educational. musically speaking, but to purposely list an artist incorrectly as the writer of a song, as you did on ” Man of Constant Sorrow ” from the Soundtrack to Oh Brother Where Art Thou. Listing ROD STEWART as writer may seem funny and I did get a chuckle, you are doing a disservice to your audience who may believe that garbage. Leave the comedy to the comedians and be as factual as possible, otherwise you will lose credibility with more knowledgable music lovers.

  34. Please do not list the writer of a song incorrectly, this type of information is important to true music lovers and you do this quite often. I’m sure a more serious concern for facts is within budget, or maybe you don’t give a damn and as long as profits keep rising you will not address this issue. If it continues word will get out that your info is unreliable and incorrect, but then again maybe you don’t give a damn, maybe your advertisers will .

  35. I am still at a loss here, The Artist Creates, The ARTIST should be able to do whatever THEY want with their creation. They can sell it to the highest bidder, or give it away or promote it and sell copies. Pandora is a promoter of these creations. Pandora could sell copies of the creation at the Artist’s request, I can hear the creation on Pandora and CHOOSE to BUY a copy of the creation from another vendor. This subject shouldn’t really be a public complaint issue. This subject should be between the artist and whatever they want to do with their creation.
    Now I agree that there is a significant loss due to piracy, But I don’t think thats the issue here. And I also think that if you have a good enough creation, people will whip out their wallets to get the real thing.
    I like my music, from the 1812 overture to Shinedown’s Crow and Butterfly, if you give me music I like, I want it, I want it for my MP3 Players, I want it for my CD Player in my home stereo. Give me something good, I will always pay a fair price for it.

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