(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. Frank Gagliano
    June 27, 2013 at 3:00pm
    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!
    Reply
  2. Angelica Altamira
    June 27, 2013 at 4:28pm
    I love Pandora and I use it to work out and everything! Pandora rocks!!!
    Reply
  3. MishaBurnett
    June 27, 2013 at 5:03pm
    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.
    Reply
    1. Mark Huss
      June 28, 2013 at 7:50am
      +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.
      Reply
      1. Fran Lang
        June 28, 2013 at 10:27am
        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.
  4. Fran Lang
    June 27, 2013 at 5:11pm
    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.
    Reply
  5. NathanAz
    June 27, 2013 at 5:44pm
    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.
    Reply
  6. Andrew Peterson
    June 27, 2013 at 6:31pm
    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.
    Reply
  7. pandora@budcaldwell.com
    June 27, 2013 at 8:18pm
    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.
    Reply
  8. Charles
    June 28, 2013 at 12:47am
    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.
    Reply
  9. Dan
    June 28, 2013 at 9:38am
    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.
    Reply
  10. Sean Murphy
    June 28, 2013 at 12:27pm
    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.
    Reply
    1. Doug Gulick
      July 09, 2013 at 5:26pm
      well said.
      Reply

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