Pandora’s War On The Songwriter

Be warned as I’m turning <rant mode on/>

Aaaah…..Pandora. Whether you hate it or love it as a listener is debatable. What really isn’t up for debate is Pandora’s clear-as-day war on writers and publishers. There are two recent bits of news concerning Pandora that are vital to pay attention to if you are a songwriter and/or publisher. First, some background:

• Pandora pays writers/publishers based on a percentage of revenue from paid, subscribed listeners.
• Pandora pays writers/publishers through the PROs (ASCAP, BMI & SESAC).
• ASCAP & BMI operate under government consent decrees where royalty rates are set by the U.S. copyright royalty board (along with the related “rate courts”).
• Pandora’s initial business model to acquire listeners was ad-supported free listening.

Now, let’s break-down the current situation and the recent news, shall we?

• For multiple years running now, Pandora has appealed to the rate courts to lower the royalties they pay to writers/publishers, though they are already below the rest of the streaming industry.
• The most recent rate court decision allows Pandora to pay 1.85% of revenue to writers/publishers. Yes, that’s not a typo. One point eight five.
• Pandora raised the prices today for their subscription listeners, noting “higher royalty costs.”
• In the same release, we see that Pandora has 76.2 million free listeners but only 3.3 million paid listeners.

So what does all this say? It says a few things, first and most importantly it makes it very clear that a company whose entire business is powered by content created by others continues to, and pardon the expression, take a rather big shit on writers and publishers. They take advantage of the handcuff that ASCAP & BMI collective wear by being beholden to the rate court, and not free to negotiate royalty rates in good faith themselves. Thankfully there is current legislation that may address this issue to which Pandora must be crapping their pants over since it would remove their best tool to keep royalties down.

“This is a very sad day for America’s songwriters and music publishers,” National Music Publishers’ Assn. president David Israelite said in a statement. “The decision confirms that songwriters will never be paid fairly under World War II era consent decrees.”

And since writers and publishers receive a percentage of the subscription revenue pool (and not ad revenue), it is in our interest for Pandora to have an effective free-to-paid listener conversion model. Well, if Pandora has a model at all, a paid listeners base of 4.1% of the total (3.3M paid of 79.5M total listeners) is a horrible percentage. The batting percentage is .041. That’s way, way worse than an American League pitcher at the plate and we all know how bad they suck. By contrast, Spotify as of March 2013, the last time they reported exact figures, had 6M paid out of 24M total users, a .250 batting percentage. But they at least had a plan to convert free to paid (i.e. until recently, no mobile Spotify access unless paid subscriber).

Lastly, just one other item to point out regarding Pandora’s perspective on the songwriter. Compare the 1.85% of revenue that Pandora pays to ASCAP & BMI to Apple’s iTunes Radio. Their non-interactive streaming internet radio, which is the same classification as Pandora, pays 10% of ad revenue. Yes, ad revenue. Apple negotiated in good faith directly with publishers and the PROs and didn’t take the chicken shit move of leveraging ASCAP & BMI’s consent decree to its advantage.

Consequently, sources say that BMI will receive 10% of advertising revenue from the iTunes Radio service.

All in all, Pandora needs music. Their business depends on it. They negotiate and sign favorable deals with labels because they feel they have to, which is true. But it’s pure and utter bullshit that Pandora utilizes their lowest common denominators to treat songwriters and publishers like, well, shit. Music has value. Artists create that music and, therefore, artists have value. Pandora is a company which through its actions obviously flies in the face of that and disregards an artist’s intrinsic value for the benefit of themselves. Kind of like TV productions that only do gratis synch licenses for music. But that’s a commentary for another time….

– Marc Caruso CEO / Head of Administration Angry Mob Music

www.angrymobmusic.com