(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. Janelle
    June 28, 2013 at 2:47pm
    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.
    Reply
  2. Brent Thomas
    June 28, 2013 at 3:33pm
    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?
    Reply
    1. Michael
      June 30, 2013 at 12:02am
      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.
      Reply
  3. wiltonhall
    June 29, 2013 at 11:46pm
    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.
    Reply
  4. Jonathan Weavers
    July 06, 2013 at 1:49am
    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
    Reply
  5. Alan
    July 11, 2013 at 5:17pm
    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.
    Reply
  6. Steve McGlynn
    July 13, 2013 at 8:16pm
    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.
    Reply
  7. Steve McGlynn
    July 13, 2013 at 9:00pm
    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 .
    Reply
  8. Francis Lang
    July 19, 2013 at 6:22am
    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.
    Reply
  9. Marsha Sell
    August 15, 2013 at 10:29am
    I'm outta here...your Liberal ads make me want to throw up.
    Reply
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