(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.

Comments

  1. https://delicious.com/dajoepanteliii
    April 15, 2014 at 2:27am
    Thanks a lot for sharing this with all folks you really understand what you are speaking about! Bookmarked. Please also discuss with my site =). We can have a link exchange contract between us
    Reply
  2. ksound
    June 18, 2014 at 9:30am
    pandora only got 500 signatures? And counted their chickens on a handshake deal. And unless the founders of Pandora are out hustling AS artists currently in this artistic climate i think it is misleading to say that it is a company founded BY artists For artists. The problem is that these streaming servies are replacing people actually buying the albums. The falsest equivalency of pandora spin to AM/FM spin is not as much the issues I think.
    Reply
  3. Teale
    July 29, 2014 at 6:58am
    The day that I hear an AD on my pandora 1 is the day I turn my GOOGLE MUSIC DOWNLOAD bot back on - and PANDORA off. Just know that - and I speak for every pandora one subscriber. It's bad enough our rates are increasing because these dip shit publishing companies have owners that want their houses on the hills and artists who fall into the trap of feeling like they need these publishers to need anything. It's a system and it will keep going as long as we feed into it. My point where I stop feeding it is when I hear someone try to sell me something while I'm studying, driving, or working. I could modify adblock to block pandora ads on pandora one if it comes to that scenario, but I think it would be easier to build my own music genome and feed it to my google bot. I've been a loyal pandora customer since 2009. As I said, the moment an ad comes on is the moment I contact customer care and ask for a refund and a disconnect.
    Reply
  4. rigpa44@gmail.com
    February 13, 2015 at 12:17pm
    There's a long way to go on this issue. It's shaking up the whole industry in 2015. Young musicians, music publishers (new and old), music streamers, and music managers need to get together, and make sure there's fair and equitable compensation for what's being produced, managed, published, played, etc. The history in this industry is horrendous. Now is the time to right the ship. And we're looking to Pandora, and others in the music industry to be leaders in this opening that creates great benefit and equitable treatment for all in this industry. Step up! Now! Best, John Parker, President, Sagewood Press
    Reply
  5. Jon
    August 23, 2015 at 9:28pm
    thank you Tim for the clear explanation...I know many artists trying to make a living in a difficult environment and I think you and your company are offering a viable alternative.
    Reply
  6. Tom Peters
    December 23, 2015 at 9:53am
    'Founded by artists for artists' , If you are you should be ashamed of yourselves - no thankyou - you team up with the biggest corporations to drive down your already pitiful royalty rate - you are a disgrace - I have pulled my catalogue from all internet radio stations and would advise others to do the same. People will find the music they need elsewhere on other internet based services. Maybe you really do believe your pathetic attempt to justify your grand larceny - but I do not. Obviously the end users are very happy - not paying fuck all as usual and telling you what a great service you have provided the world - but we did that, and you fucked us with your six figure salary, white teeth and nice tan. ponce
    Reply
    1. frank anthony
      December 24, 2015 at 10:44pm
      Merry Christmas to you, too! First, Pandora pays more than 70% of its revenues to the companies that screw artists, you know, your record company. It is they who are robbing you. And who are you anyway? I've been in the music business all my life, yet somehow, I have never heard of you. It's this that might have something to do with your frustration and your obvious poverty. In case you don't know it, There is more money in the music business than ever; sorry if you can't get your hands on some. You do come across as ignorant because everyone knows that the big money is in performance. Sorry if no one comes to your shows but it does require that you know how to make an audience want to pay money to see you. Please pull your music from all streaming services, then no one will ever hear you because in case you haven't noticed, no one listens to radio anymore. But then again what does it matter because unless you have one of the twenty most popular songs corrupt programmers are paid off to play, either way, no one is likely to ever hear you anyway. If you do not know how the game is played, you will always lose the game. If you were great your shows would be SRO and you would be rich!
      Reply

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