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

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

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

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

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

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

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

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

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

Artists, this is your future. Own it.

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

Tim
Founder, Pandora

Comments

  1. Reid Foster
    October 10, 2012 at 4:41am
    Lefsetz is right. Tim Westergren is on the wrong side of this issue. To argue that artists are making too much on royalties is completely backwards. I'm a big fan of Pandora, but this is the type of thing that will lead to it's end. Guaranteed.
    Reply
  2. Adrian Auchrome
    October 10, 2012 at 7:07am
    To earn $3M in royalties, Lil Wayne would need around 1.5 billion plays for the year. This enabled the delivery of around 500 million audio advertisements. What revenue does Pandora get for an ad delivery? So long as it is greater than royalty+overhead, I'm not going to feel particularly bad for Pandora. If it's less, then maybe their ad rates or overhead costs need closer review.
    Reply
  3. Rose
    October 10, 2012 at 7:31am
    I'm all for supporting the artists... But what happened to free radio? These shocking AUDIO ADVERTISEMENT inserts have completley ruined my listening pleasure.
    Reply
  4. Philip Wesley
    October 10, 2012 at 8:15am
    As an independent artist, I am one of the poster children for Pandora/artist sucess. I was virtually unknown and not able to make a living off my art until Pandora accepted my music and plugged it into their music genome project. Pandora is single handedly driving ALL my revenue streams. Not just royalties that Pandora pays out. Now, ALL my combined revenue streams are able to make me enough money to take care of myself and my family, and to continue making new music for people to enjoy, even during this tough economic time. I owe everything to Tim Westergren and those at Pandora. They have been able to achieve something that no other radio entity in this business has. Thank god for Pandora, iTunes, Amazon, CDBaby, PayPal, Square, and all the other innovative companies out there that help musicians make a living from their art. Also thank you to all the fans. Without your support, none of what I do would be possible. With much gratitude and love to you all. Philip Wesley solo piano www.philipwesley
    Reply
  5. radio vet
    October 10, 2012 at 8:19am
    Maybe some of this will help. I'm an old radio vet. I have a syndicated radio program. We have to keep it on standard broadcast radio, limiting our means of income, because of the issues that Tim brings up in his blog post. Terrestrial radio does not pay a Performance Royalty under the DMCA for standard broadcasting. The performance royalty is only paid on non-terrestrial mechanisms, such as the Internet. Here's the structure: http://www.copyright.gov/carp/webcasting_rates_final.html Digital Performance Right in Sound Recordings Act of 1995 http://www.copyright.gov/legislation/pl104-39.html Digital Performing Rights in Sound Recordings: The U.S. Experience (2002) http://www2.gtlaw.com/pub/articles/2002/jacobsonm02b.asp
    Reply
  6. Zach
    October 10, 2012 at 9:17am
    I think there's one important thing to note about the royalties. Yes, Pandora is saying they want to cut what they pay. But right now, they're paying around half of their revenues to royalties, according to a bunch of news stories. It used to be closer to 70%. I remember when Pandora was saying they might be out of business because they had to pay so much and it wasn't sustainable. So what makes sense - cutting royalties to artists so it's more in line with what a service like Sirius pays, and hopefully asking terrestrial radio to chip in too just to keep things even, or keeping the rate high and having Pandora eventually fold? It's the goose that laid the golden egg, just in online radio. Yeah, if I was an artist, I'd probably be disappointed that my checks would go down. But it doesn't help a lot if the service I get them from is going to fold.
    Reply
  7. Casey Meehan
    October 10, 2012 at 9:48am
    Great points Tim. I am encouraged by this post. I think we still live in an age that most people (music lovers, perhaps congress?) do not understand how difficult it is to make music a livelihood. In the past 2 years, (via my ChicagoMixtape.com project) I have come into contact with over 500 "professional" bands which comes close to nearly 2000 musicians who are very dedicated, passionate and gifted artists and very few are able to sustain in the current environment. I truly believe that our culture on a whole is suffering from the laws that you discuss here, thanks for shining a light on these issues. Casey ChicagoMixtape.com PS > It was great to meet you at the Theophilus London concert in Chicago a few weeks ago.
    Reply
  8. john
    October 10, 2012 at 10:17am
    1. If Pandora gets it's way, what would those payments that you are touting look like? Let's see that before I feel so badly for Pandora. 2. Those unknown artists, how much would those figures be cut? 3. The known artists, how much would their figures be cut? 4. So the blog is about how the artists are making too much?
    Reply
  9. Mark
    October 10, 2012 at 10:56am
    All respect intended, I responded to this post on my blog at Forbes. You make many good points and I wholeheartedly support your desire to create a "middle class" of artists, but there is something self-serving here.
    Reply
  10. Mark
    October 10, 2012 at 10:56am
    Here's the link, http://onforb.es/R8IwuL to the article.
    Reply

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