(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. Inge
    June 27, 2013 at 1:25am
    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...
    Reply
  2. Dan OCallahan
    June 27, 2013 at 3:34am
    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."
    Reply
    1. Dan OCallahan
      June 27, 2013 at 3:36am
      Actually, I meant to say that I purchased them last week.
      Reply
    2. T. Song
      June 27, 2013 at 1:44pm
      Same here. Pandora steered me onto a new artist, which prompted me to purchase their CD and go to their concert. Without Pandora, I would have done neither.
      Reply
  3. Leslie
    June 27, 2013 at 6:13am
    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.
    Reply
  4. Al
    June 27, 2013 at 6:18am
    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!
    Reply
  5. Backstretch
    June 27, 2013 at 8:55am
    @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....
    Reply
  6. Gordon Williams (@SupposeNot)
    June 27, 2013 at 9:34am
    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.
    Reply
  7. Peter.D
    June 27, 2013 at 10:40am
    Apple's radio will crush Pandora. No doubt
    Reply
    1. Al
      June 27, 2013 at 2:50pm
      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."
      Reply
      1. Mike Jones
        June 28, 2013 at 7:18am
        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.
    2. g2-fc31c2290a2aca171ef69cececdcf9b4
      June 27, 2013 at 4:37pm
      People with Apple boners seriously need to sit down already. Your beloved products are so basic that it hurts.
      Reply
  8. Brad White
    June 27, 2013 at 11:17am
    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!
    Reply
  9. Bob Fiesters
    June 27, 2013 at 12:00pm
    So why buy the terrestrial radio station in the middle of nowhere?
    Reply
  10. Michael
    June 27, 2013 at 12:53pm
    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.
    Reply
    1. Ken Dardis
      June 27, 2013 at 2:34pm
      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.
      Reply
      1. Michael
        June 27, 2013 at 3:38pm
        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).
      2. AllMemphisMusic (@AllMemphisMusic)
        June 27, 2013 at 4:04pm
        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.
    2. Ken Dardis
      June 27, 2013 at 6:18pm
      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
      Reply

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