On a day when Spotify’s future looks grim, internet radio powerhouse Pandora joins the conversation.
This morning, Pandora founder Tim Westergren blogged about the revenue stream it provides to artists, large and small, and the company’s value to the music community. However, he also used the opportunity to push for new regulations that would cut those same royalty payments.
First, Pandora’s good news: “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.” Westergren also points out to the six figure sums the company pays to lesser known acts like Donnie McClurkin, French Montana and Grupo Bryndis.
The unfair and deceptive side of the revenue numbers, at least according to Westergren, is that it’s all coming from a company that only accounts for 6.5% of US radio listening. “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,” he claims.
“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.” Under the current licensing regime, internet radio pays a higher rate than terrestrial radio companies, including Pandora competitor SiriusXM.
According to Forbes, Westergren’s preferred solution to this unfair business practice is the Internet Radio Fairness Act, the goal of which isn’t to have companies like SiriusXM pay more, but to let companies like Pandora pay less. And if Pandora is able to slash it’s royalty rate, it will also be slashing the payments that it bragged about in the first place. Clearly, the company has a fair interest in cutting its costs, but Westergren’s blog post is misleading at best.