Pandora spends a huge chunk of their revenues on copyright, which is why they spend a huge chunk of their time trying to lower their copyright obligations. Pandora’s business model is also limited to a slew of copyright-related usage restrictions, which is one reason why Wall Street has been cautious around this stock.
But what if Pandora could control its own copyright deals, and thereby better control its destiny? Enter Warner/Chappell Music, the third largest music publisher in the world, who just inked a direct licensing deal with Pandora. The multi-year deal, announced today, complements earlier deals with Sony/ATV Music Publishing and Universal Music Publishing Group, the first- and second-largest music publishers in the world, respectively.
Pandora still has to pay, but the deals will be broader than the bureaucratic, territory- and usage-constrained deals concocted by the US government. That means greater ability to expand into foreign territories and more easily expand into areas like on-demand streaming, for example. Just recently, Pandora acquired Rdio and is already asking rightsholders for expanded permissions, according to DMN insiders.
Warner likes this deal, in part because it sends more money directly to them. “It is Warner/Chappell’s top priority to make sure our songwriters are prospering both creatively and commercially, and that the value of their music is properly recognized,” Warner/Chappell Music CEO John Platt offered in a statement.
Critics, including top industry lawyers and songwriter advocates, question whether direct deals are the healthiest next step for this industry. The ‘bad actor’ problem that have sullied major labels for years could be replicated on the publishing side, with writers getting scraps, or stiffed altogether.
Meanwhile, Pandora is nail-biting ahead of an all-important rates determination by the US Copyright Royalty board, which determines another tier of royalties sent to SoundExchange. Those rates are expected to be delivered this week (and the market is watching).