Pandora and Royalties
blog.pandora.com
blog.pandora.com
There is no reason why iHeartRadio should pay less than them because it's owned by Clear Channel. There is no reason they should keep paying ASCAP the same percentage of their revenue for royalties after someone as big as Sony ATV pulls their catalog from ASCAP representation. The Internet Radio Fairness Act was not about necessarily reducing royalties, but ensuring that all companies streaming digitally pay the same percentage of revenue. It makes absolutely no sense to me that everyone is focused on Pandora trying to reduce their rates to the same level as their competitors, instead of focusing on the fact that those competitors already pay less.
Compulsory rates that work for these companies are the best opportunity for independent artists to participate in this market. If you force these companies to secure direct deals with labels because the compulsory rates are not equitable, you will get what just happened with iTunes Radio. They will forge sweetheart deals with the major labels and treat indies like a nice-to-have group of second class citizens.
The artist community should be working harder to increase royalties paid by the companies already enjoying massive discounts. The artist community should be interested in making their music as easy to license as possible, a la compulsory licenses. If you make the rates unsustainable, and even worse, push the revenues through label accounting departments, artists will be left in the cold and have most of their share kept by labels.
Pandora has definitely gone about this in a way that hasn't worked in terms of PR, but it is unfathomable to me that all of a sudden everybody on earth forgets that the person on the other side of this issue is the RIAA. Nothing the RIAA has ever done was good for consumers or artists. Why on earth would it be now?
Pandora pays more royalties than any other type of radio broadcaster. It's time to make other companies pay more, while finding a rate and system that works for everybody and doesn't require direct licensing. Any other situation does not bode well for artists.
Worth repeating Lowery's claim: the major label system worked somewhat like the VC system: hit artists made huge amounts of money on royalties, but midlist artists didn't; on the other hand, midlist artists got advances calibrated to their expected sales that locked in a middle class lifestyle. It was, as Lowery explains it, possible for a midlist artist to make a decent living selling music under the label system.
According to Lowery, midlist artists are totally shafted today. They get no advances, they get a pittance from royalties, and, contrary to popular opinion, they don't make a decent living from 2/3rds sold out club concerts.
http://money.futureofmusic.org/mythbusting/3/
http://www.altpress.com/features/entry/no_money_mo_problems/
http://emuisemo.pbworks.com/w/page/40222045/Economics%20of%2...
Now, let's say your band can fill a 250-person venue as the sole band and gets a 60/40 door split. For most indie bands, this is approximately as likely as a rainbow-colored pony appearing in the bass player's bath tub, but let's go for a best-case scenario. For each $20 ticket, the band will see revenues of $12.
The median band plays 11-50 shows a year. Let's say a 4-person band (a) plays 50 shows, (b) sells out every show, (c) as the sole artist at the show, (d) has no touring expenses.
(250 x 50 x 12) / 4 = $37,500 apiece
David Lowery says there are well-known bands that are living out of their vans. I believe him.
There's a good system-level argument for things like certain regulations, certain unions, patent law, copyright law, etc. The long-term benefits exceed the shorter-term costs. And these sorts of arguments can also be extended to why it makes good sense (and why it is a societal benefit) to give a middle-class income opportunity to a certain level of musician, when being left purely to the free market might not allow it.
The problem is that we aren't really noticing the negative effects of not having that. There's a ton of pretty good music coming out from the ever-replenishing generation of musicians that is motivated to produce for 2-3 years just out of deluded dreams before they burn out from the lack of lifestyle-supporting income. You get lots of simple pop forms, looping electronica, mashups, and exaggerated dipthongs.
Meanwhile, we're probably getting a lot less of any of the sorts of revolutionary music that could come from a talented artist being financially encouraged for a decade or more. The tragedy is that we probably won't ever know what we're missing.
Basically he posits that if you have 1,000 fans that buy everything you produce, you can make a living.
He is expecting that a true fan "will purchase anything and everything you produce. They will drive 200 miles to see you sing. They will buy the super deluxe re-issued hi-res box set of your stuff even though they have the low-res version. They have a Google Alert set for your name. They bookmark the eBay page where your out-of-print editions show up. They come to your openings. They have you sign their copies. They buy the t-shirt, and the mug, and the hat. They can't wait till you issue your next work. They are true fans."
Later he posits that the true fan will spend 1/365 of their income exclusively on you (presumably not including the travel costs of driving 200 miles to your concert), nor does he account for how buying out-of-print copies of your material on eBay provides you with income ... unless you're selling it rather than other eBay sellers.
In his estimation, all costs and expenses you incur are modest, you will make a huge chunk of $100 off of each of those thousand fans ... well, if you're a solo artist and you personally nurture your True Fans.
okay ... so maybe it is possible, but he hand waves so much that it feels like he's not operating in the real world.
Reminds me of the Kids in the Hall's Money Momentum skit:
This is very good data. Also kind of scary. I knew musicians had a hard time of it, but I've never seen the numbers crunched like that.
As a semi-relevant aside, my girlfriend works on Broadway and frequently tells me about the actors/actresses she meets. There are well-known stars who make between $10-20 thousand per contract (which may last about 6 months, commonly) despite having a leading role. I suppose it's similar to the music industry - only a privileged few ever make it to what an engineer would call "starting salary" and only a handful ever get rich (comparatively).
It's saddening that the arts are so monetarily difficult. I have a deep appreciation for music, theatre and film but the constituents really get shafted.
You might be thinking of Off Broadway - all of Broadway has to pay Equity rates, which as of last October was $1,754 per week. The minimum an actor would make on a six month Broadway contract would be ~$45k (normally slightly more, there are a number of things Equity adds on top, like Per Diems, chorus fees, etc).
This is still not a lot, and of course many actors may go months without work. Non-equity gigs are also often much lower paying.
Midlist artists maybe suffer from something akin to increased competition?
... that pay to play is okay.
I agree with your company's business model.
The rest of your comment is informed, but you should lead with less bullshit lingo.
"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."
He's using industry jargon to pretend like FM radio doesn't pay out to artists. The reality is, he's being very deceitful.
I own a group of radio stations. We've paid out more to music rights than we've generated in profit over the last two decades. If the artists want a different form of royalty representation, such as direct royalties from radio stations (instead of getting a small downstream cut from the licensing companies), they need to abandon the labels and the status quo. Radio stations didn't arrange this formula, and I'd personally vote in favor of abolishing it tomorrow if I could. I'd rather the artists get 100% of the fees we pay for music rights.
[1] Yes I've been in restaurants where the background music came from Pandora (probably not part of the ToS)
They were more than likely licensed for it, it's only $24.95/month for business use (http://www.dmx.com/pandora/).
WHO PAYS FOR: Pandora AM/FM
Songwriting/Publishing YES YES
Performance YES NO
[1] http://theunderstatement.com/post/53867665082/pandora-pays-f...
Your position claiming that radio pays 10% what Pandora does for each listener hearing a song is bogus, just on the fact that you can't actually show me how many people are hearing a song on my radio stations at any given time. Thus you are presenting false data.
I specifically said that the claim that radio doesn't pay out to artists is deceitful. It is.
If your issue is that publishers are ripping off artists when it comes to the cut from radio plays, then why aren't you arguing in favor of fixing that? Radio stations don't get to choose how they license popular music; they don't get to pick whether they pay publishers via BMI / ASCAP or artists directly.
Also, in fact, in the past I have indeed argued that Pandora is getting screwed compared to radio. It's obvious they are.
Yes he blends them into the conversation about how much radio stations pay, and what a play is worth, because it is relevant to the discussion! Performers deserve to get paid for performing their songs as well as the writers.
I can prove him wrong in about 5 seconds.
Do any musicians own the rights to their own songs? Do any musicians write their own music? Do any musicians get royalties for radio plays? And there you go, I just proved him wrong.
He presented a case claiming X was 100% true, and he lied. Plain and simple.
Did you mean profits of revenues? I don't understand why radio should have profits higher than one of it's largest costs item
You're making my point. Radio pays out significantly to music rights owners. In my case, about three fold greater than the profits generated since 1990. It's up to the artists to determine the contracts they sign with publishers, and the extent to which they own the rights to their music. That dictates how much they get paid for radio plays.
Whether you get paid for plays on FM as an artist, depends on if you own any rights to your music, and or what deal you've signed. The best thing you can do as an artist, is try to retain maximum ownership of your music, and make sure you get the best deal possible if you sign with a publisher.
Westergren is completely wrong about nothing going to the performers. First of all, the fact that some performers also own their music rights and are songwriters with royalty cuts, proves him wrong. Second, the cut that goes to the performer is determined by the contract they sign.
The only person who lied about this is David Lowery in the headline: "My Song Got Played On Pandora 1 Million Times and All I Got Was $16.89, Less Than What I Make From a Single T-Shirt Sale!" because that's NOT all he gets, he also get performance royalties (which he clarifies in the blogpost, but the headline is still wrong until he qualify that he's talking about songwriting royalties).
Ultimately the rights owner determines everything, and that makes it a very simple equation.
If a performer wants paid, they can determine that by the contract they willingly sign with a publisher. It all comes back to who owns the music and who signs what royalty deals.
US radio stations pays for one of these, pandora pays for both. http://milomlaw.com/news/terrestrial-radio-performance-royal...
You say you pay artists but then you imply that you pay associations / labels who then pay artists based on their contract with the association / label.
Doesn't that mean that you do not pay artists in the same manner as Pandora?
(also, if you have the time, I am not exactly sure what the performer, artist etc. separation is regarding payments, could you clarify?)
The fact is, and this is a fact: artists get royalty cuts from publishers based on radio play. The details of it varies from one contract to the next (eg what Madonna makes versus Joe Nobody).
Also, sometimes artists are the songwriters, that's not uncommon at all in fact. Sometimes artists have very lucrative rights ownership over their own music. That all depends on the choices they make along the way.
Radio doesn't pay artists directly (would have been wildly impractical until recently), but that's also not by choice. Radio stations don't get to choose how they license the music, that's dictated by the rights holders of the music (the publishers and companies like Sony ATV hold most of the power).
>> "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."
> He's using industry jargon to pretend like FM radio doesn't pay out to artists. The reality is, he's being very deceitful. (Emphasis added by RurouniJones)
But based on what you have said above he is correct. You do not pay out to artists, you pay out to associations (I understand this is not by choice and that you are basically screwed by powerful publishing cartels).
It may be a small semantic difference but you said he lost credibility and was being deceitful by saying it when he (at least to me the layman) appears to be correct.
Yep, Pandora is pretty cool, and the genome projects is really cool, I'm looking forward to finding out what it says about my own songs, and I'm hopeful that my songs will be recommended to people who will have a real affinity to the songs. I personally like Pandora (as a concept) much more than Spotify, because in Pandora if they want to hear my music again, they have to actually go find the cd and buy it. In Spotify, I'm basically screwed.
Onward... to paraphrase, "We don't want to cut royalties by 85%, we want to GROW total payments to artists!" is a bunch of doublespeak. Growing total payments is not the opposite of cutting royalties. He could have every intention of "growing the pie" to make up for the smaller pie slice, but if his starry-eyed intentions to grow the pie don't pan out, it still means a cut for the artists. Guess what, a really great way to "grow total payments" is increase the pie while keeping the pie slices the same, or increasing them.
Purely as an aside, performance royalties confuse me. I paid between $50 and $300 to my session musicians on my EP and considered it work-for-hire. I'm assuming that means I don't have register them as session musicians at soundscan, but I really have no freaking clue. I don't even know how to get hold of half those musicians now.
Anyway, organizations like pandora like to confuse discussions by bringing in performance royalties - for instance, an artist might have a complaint that is specifically limited to the inequity of the songwriter royalties. Responding with "you are forgetting about the performance royalties!" is completely irrelevant. The law is that digital radio pays performance royalties (through soundscan) in addition to songwriter royalties, and (US) radio only pays songwriter royalties. That's not the artists' fault! If an artist has a beef about songwriter royalties, hitting them over the head about how unfair it is that they also have to pay performance royalties is intellectually dishonest.
I think Pandora needs to work on their point of sale here. I buy a lot of music, but if I like a song Pandora I'm more inclined to prop it open on a tab on Youtube than I am to go through the hassle of opening iTunes to download/purchase it. Currently, the quickest route is via Amazon MP3, but even that isn't perfect (especially because most of the stuff I'm inclined to purchase isn't on Amazon/iTunes.)
I guess what I'm trying to say is that one-click purchasing on Pandora would be wonderful.
Perhaps the issue is one of perceived value to the end user. When I hear a song that I love, I have to own it. If I hear something on Spotify I'm off to the iTunes store to buy it. If I hear it in a shop or at a party, I Shazam it and I'm off to the iTunes store. If it's not on the iTunes store, I look for a store that has it. If it's not available on any store (this happens frequently - I listen to a lot of underground music) I check on Soundcloud. If it's not on Soundcloud then I'm off to Youtube and favorite it so that I can look for it again at a later date.
My music collection used to be 100% pirated, but when I lost my collection (and backups!) I realised how much good music meant to me. It's worth more than most of my possessions. The issue for many is perceived value - I cannot fathom how someone would happily pay for a beer or some other quick buzz but not for a song that will bring them joy for the rest of their lives.
Pandora is saying they are trying to get more royalties for artists, and they are truthful in saying that. If they do some growth to get there, does that hurt artists in anyway?
> unfair it is that they also have to pay performance royalties
All the talk of performance royalties is about fairness to artists from what I have read, not complaining about expenses, but saying Pandora actually considers the performer.
And, Pandora paying performer royalty is not about fairness from Pandora's perspective, so you can't really say they are considering the performer any more than I am considering a random stranger on the street by not punching him. They're required to pay performance royalties by law.
I believe they avoid saying that they'd love to cut out the middlemen between Pandora and the artist. How much of those royalty payments are sucked up by licensing agencies? Remove that amount from the equation and now artists can get a bigger paycheck and Pandora can pay less overall.
1) No direct payments to artists
2) Set a high rate with Pandora as a benchmark because in FM and CDs are dead when thinking more than a few years into the future.
While I completely think Pandora is right, the RIAA is playing their hand well, and Tim Westergren just shit the bed with this stupid posting. I have no idea why Tim felt the need for all the bullshit:
> Pandora is a company founded by artists to help artists.
You mean "that helps artists"?
> an email from me asking artists if they would show their support ... We did not play these conversations out in the media
You send an email to hundreds of thousands of people, and think it is private?
Pandora needs a new PR person. When the facts are on your side, there is no need to spew bullshit.
I understand the concept of being screwed, but it's just wrong. There's no business model where someone like Pandora could pay artists a meaningful amount (10x-1000x more depending on your definition of meaningful) and still grow to any scale that matters. So take the distribution and capitalize!
In my iTunes library, I can see how many times I’ve played a song. There are some that I’ve played hundreds of times, and there are some that I’ve never played. For all those songs, I paid about the same amount. If I’d have to guess, I’d say, on average, I’ll play each track 10 times.
That means I pay about $0.10 per ‘iTunes spin’, of which more than 60% goes to the creators. Compare that to a Pandora spin, which they say pays $0.00137 (one-tenth of a cent).
The creators only get a small fraction of that and only after they've repaid their studios' various costs. A lot of the studios' costs come entirely out of their artist's royalties. Here's Courtney Love famously explaining how an album can gross 11 million dollars, the studio makes 6.6 million profit and the artist never sees a penny:
Also, hundreds of thousands of independent musicians offer their music directly through iTunes, or via a cheap intermediary like CD Baby.
You explicitly chose each of the songs you've purchased on iTunes. In contrast, song 'spins' on Pandora is not necessarily one you would've sought out on your own, nor chosen to pay money for given the option. I think it's only reasonable that the incidental-ish nature of these spins should be valued less than the intentive ones of your iTunes purchases, and yes, I think being valued several order of magnitude less is reasonable.
If Pandora’s service would provide several orders of magnitude less value than handpicked purchased tracks, then no-one would pay for it.
In many ways it is identical to radio, including solving the same problem - "give me a kind of music that I can enjoy". Instead of listening to something vague and poorly defined like a Metal channel on the radio, you're listening to a genre as defined by Pandora's much more nuanced song trait maps. Like radio, the service limits the amount that a single artist is played - you're unlikely to hear more than 1-3 songs by the same artist. You also have no ability to rewind and listen again.
As a discovery tool like radio, Pandora also has positive externalities that are not demonstrated by simple royalty payments. Ff you enjoy an artist enough, you're likely to purchase their music (or just find it on Youtube) either because you want to hear more of their music, or simply because you want direct control over when you listen to that song.
But sometimes I wish there was a way to reward artists with long standing personal value to me. The $15.99 CD I purchased in 1987 doesn't feel like adequate tribute for the thousands of times I've chosen to listen to the songs. It might balance out (from the consumer perspective) with all the crap I've bought and listened to once only -- but in many ways that is all the more galling.
First of all you compare value that YOU pay ($1 per song) on iTunes to what CREATOR is paid for on Pandora.
Second of all, Pandora is like radio, not like iTunes. You cannot select song, you have to listen to the ads. The utility of the song on iTunes or CD is very different to the song listened on Pandora.
Thirdly, your assumptions are based on no data and I doubt match reality.
The only fair comparison to Pandora is terrestrial radio, and based on all information we have Pandora pays MORE per spin then average radio station.
No, I compared my spending habits on iTunes to Pandora’s subscription costs, and I compared what creators get from iTunes for a track to what Pandora pays creators for a ‘spin’.
Like I said, the UTILITY of both is very different. CD/iTunes track you can copy to other devices, listen offline. Heck, you can even sell your CD. On Pandora you can't even select the song you want to listen to. Because of the fact that you are forced to listen to some songs, average value of song has to be lower. On top of that you get lower quality. You have to listen to ads.
Furthermore, your spending habits are representable only for you and I still believe that you can't just assume that average person plays track they bought only 10 times over the lifetime.
Finally, you cannot forget of all external effects of 'discovery service' that Pandora is. Pandora not only is not replacing iTunes and other ways of purchasing the music, but is helping to increase the sales by exposing you to new artists you would never hear or normal radio.
I don’t, I just shared my experience. But let’s say my use is atypical and most consumers listen to a purchased track 1000 times. Then the track’s creators still receive more money per spin from iTunes than from Pandora.
> you cannot forget of all external effects of 'discovery service' that Pandora is. Pandora not only is not replacing iTunes and other ways of purchasing the music, but is helping to increase the sales by exposing you to new artists you would never hear or normal radio.
I believe most of that is true. Let’s hope it gets people to buy more music, not less.
I’m not against Pandora as a service, I think it combines some of the greatest strengths of computers and the Internet. The blogpost was about how they compensate artists, which is what all my comments have been about.
Pandora is radio, and radio is marketing. Much like the FM radio I listen to the artists don't make much money, but I'll hear artists I like who I wouldn't have spent $40 on before.
You receive substantially less with Pandora, as a customer. You effectively receive the same thing you'd get from Radio.
So, this means you have to look at why people buy music rather than simply listen to it on the radio or something like Pandora or Spotify.
I buy music because I want to own that music, and listen to it. I want the higher quality. The majority (let's say 99%") of the purchase price is going towards the intent of purchasing it, and owning it to listen to it whenever I want.
Using your equally made up numbers and assumptions, that would equate to $0.01 of every $1 for a song going toward the value of listening. Using your 10 play rule, that's $0.001 per play, or less than pandora.
Now, you might disagree with my math, but hey, if you can't invent numbers, so can I (and technically speaking, mine is far more correct than yours). More importantly, you can assert this is founded on logic by asking yourself:
Would you pay $1.00 for a song you could only ever listen to 10 times?
If the answer to that is no, then your argument doesn't hold water.
I really fail to see your logic? Buying a CD (which is a dying industry, which can be seen by the number of CD selling companies going out of business) has nothing to do with pandora. Pandora is an internet radio, end of story. It streams music over the internet, your radio streams music over the fm/am waves. Buying a CD is more expensive, because it's suppose to become yours, while you may personally listen to it 10 times, that is not a problem for the CD seller. You paid $20 to buy their songs, you can listen to those songs millions of times over 15 years and play them in front of your friends, or at a house party. Or you can listen to it 1 time. But you don't pay for the number of plays, because it could and can be unlimited. You could play that CD 24/7 for 10 years if you want.
That is what you are paying for.
Oh and if you think artists get 60% you should go talk to one. While some indie artists may get that. Anyone who sells a fairly nice amount of CD's makes next to nothing on CD sales, some even lose money. I'm not sure how accurate it is but http://www.theroot.com/views/how-much-do-you-musicians-reall... is an example (there are probably more out there)
What you’re describing is a gym membership. Sure, some members spend all day every day at the gym. In reality, most members come in rarely if at all.
If most consumers are like me, they don’t play an album millions of times.
> Oh and if you think artists get 60% you should go talk to one. While some indie artists may get that. Anyone who sells a fairly nice amount of CD's makes next to nothing on CD sales, some even lose money.
I didn’t say 60% of CD sales go to artists. I said more than 60% of iTunes music sales go to creators (which includes the label, writer, performer, etc.)
I also didn’t say I buy a lot of CDs. I only buy an album on CD if it’s not available of iTunes. When I buy a CD directly from an unsigned artist, it’s mostly profit for them, but in most other cases, the performing artist makes under a buck for something I paid $20 for.
It's the same thing, you don't pay for one listen, you pay for it becoming yours (as well as it being printed/shipped/profit for cd seller).
In the case of a CD, I pay approximately 65% for the physical disc and 35% for the license to play the music in a private setting. In the case of iTunes tracks, I pay approximately 35% for Apple’s infrastructure and 65% for the license to play the music in a private setting. In neither case do I own the music and there are limits to where I’m allowed to play it.
This question might make sense for Spotify (disclaimer: I have never used Spotify, and don't really know how it works), but it makes no sense for Pandora. You'd buy the tracks so you can listen to them on demand, more than twice a day. Maybe even twice in a row! I have a pandora channel on which one song that I particularly like rarely plays, even though it's thumbed up. I'd be happy to buy the track, except it's only available through iTunes.
You yourself admit that you spend a lot more to purchase songs as opposed to using Pandora, which tells me that purchasing tracks provides value to you that is unattainable via Pandora.
The experience was so annoying I actually had to write a comment about it.
Apple offers iTunes Music in 118 countries. Microsoft offers Xbox Music in 22 countries. Amazon offers Amazon MP3 in 7 countries. Google offers Google Music in 1 country.[1] Then there are the streaming services: Pandora serves 3 countries, while you can become a Spotify member in 31 countries.
[1] http://www.macstories.net/news/mapping-the-entertainment-eco...
I just spend about 30 seconds right clicking on random stuff while pandora was playing and never sound a save that would let me save the MP3.