One thing is for sure: a rate cut is never good for the artists and songwriters that provide the content for Pandora or any other such service.

That is, unless the rate prohibits companies from staying in business.  There is a saying that it's better to have a small slice of a big pie than a huge slice of nothing.

So let's just create a welfare state for internet radio startups?

The better system would be to force companies to survive with real royalty structures, and not beg for handouts to prop bad models.  

If Pandora is an online equivalent to terrestial radio, then 3.2 million plays is equal to 100 spins on a radio station that reaches, for the sake of easy math, an average of 32,000 listeners at any given time.  On the surface it sounds like a lot of exposure, but, at the end of the day, 3.2 million spins (each to one person) is about the same as getting 2 weeks of airplay on 1 CHR station.  A big part of the PRO royalty calculation is based on the size of the audience that a song reaches.  In terms of on-demand streams, 3.2 million is a really good number that would theoretically result in a pretty good payday, but as far as radio goes, not so much.  There's an argument that the BMI royalty should have been more than $39, and it should definitely be looked into, but as far as an individual song receiving that level of airplay, it's not going to generate significant income in a radio format.

Thank you Mr Steve Gordon for that post (and paul? for posting it)

Quote "approximately 4.5% of its gross revenues to ASCAP, BMI and SESAC collectively. "

Thats basically what i was able to find out via google also :-) , and explains why Pandora doesnt want to come to Canada, as (if I remember correctly) we are asking 6% for the collectives (which may change soon)

I still dont know if that 6% also included the terrestrial radio stations?

Quote "they use complex formulas which are mainly confidential to decide how to pay their members."

Not only confidential, but it seems they are still not using "real world numbers" and instead are predominately using "radio plays, and unit sales" as their primary source.. (from other discussions I have read)..  Seems to me the primary problem is the 'collectives' have also refused to acknowledge the digital age. ;-)

having said that, I also wonder how much of a 'delay' is happening between payments from outside sources to where they are actually getting paid out..

Quote "Pandora is seeking a reduction in public performance revenues because ASCAP (as well as BMI) recently negotiated lower fees than those Pandora has to pay in an industry-wide agreement with the Radio Music Licensing Committee (RMLC). The RMLC represents major radio groups, and the agreement covers both broadcast and internet radio usage for the majority of Pandora's competitors. That includes iHeartRadio, which is owned by the Clear Channel."

That I find very interesting as I didnt know the details of the "why"..

if thats the case then I totally can't blame them, why is 'radio' and a specific group getting the best deal?

There was more then a few people stating that there was a standard rate for everyone? not true then?

And here we have the 2000 pound elephant in the room, it seems to me. RADIO doesn't pay artists for performances of their work, any more than streaming services do. Performance royalties are collected and (supposedly) paid out equitably by the P.R.O.s (ASCAP SESAC and BMI in the US). This inequity of payments is THEIR problem to solve for us. Here in Nashville the biggest edifices (by far), at the very top of Music Row, are ASCAP and BMI. Big Machine, Curb Records, even Sony's offices can't compare. SESAC also has an impressive (and growing) facility. The PROS COLLECT THE PERFORMANCE MONEY BEFORE ANYONE ELSE. And THEN distribute based on an opaque "survey" system. In the digital age, survey methods are obsolete. We have the technology now to detect EVERY TIME a particular song is played, virtually anywhere. But guess what, the PROs don't want to account for every song played. Because it ruins their "survey" model WHICH ALLOWS THEM THE ABILITY TO DECIDE WHO AND HOW MUCH TO PAY, without accountability. This artist royalty travesty has to be solved (through legislation probably) by the PROs. But THEY DON'T WANT TO GIVE UP THEIR OLD WAYS any more than the labels do. Pandora and Spotify and yes, coming soon Apple, can provide the PROs with a black and white picture of what was played and when. They can accurately account for and pay the digital royalties to performers (and include the players and producers!) through legislative mandate. But this "grey area" holdover from the old system, royalties that fall through the cracks due to lack of accountability, it appears that the PROs don't want to give up any more than the record labels wanted to account properly to their artists. The PROs need to get together, take their formidable war chest of unpaid royalties, and fight for the artists they represent. As long as they are in collusion with the other obfuscators in the business, artists will continue to be ripped off. Terrestrial radio, except in country music, is being more and more marginalized and yet music is being played, enjoyed and used for commercial purposes more than ever...increasingly every day. Let's account for and pay the creators based on factual, reportable information, already available. Events-in-Music.com

The real reason Pandora plays pay less!

Digital Music Subterfuge, 2012:

Spotify: "We don't pay artists, we pay labels"

Pandora: "We don't pay songwriters, we pay PROs"

now ask the labels how much they got paid by the above entities, and how much was paid to the artists, and how much is in fact in compliance with the contract that they signed with the artist ?

It's not entirely true to say ASCAP negotiated a rate with the RMLC. The rate agreed was far below what ASCAP (and BMI as they have also recently agreed a similar settlement) would have wanted but given the alternative of going to the rate court they probably saw it as the lesser of two evils.

Also a big reason in why EMI, soon to be followed by Sony and in all likelihood the other major publishers at some point are taking back their digital rights is that they are in a much stronger position to negotiate with Pandora. If Pandora disagress with ASCAP/BMI on rates then they can take them to the rate court. The major publishers on the other hand are not legally obligied to issue a licence and can withold their content until they get the desired rate, knowing that any music service will struggle to operate effectively without their content.

You don't think it could also be said that the rate agreed was far above what the RMLC would have wanted but given the alternative of going to the rate court, they probably saw it as the lesser of two evils?

To suggest that just because ASCAP may have wanted more takes nothing away from the fact that the rate absolutely was the result of a negotiation.

No that's true. I wasn't too clear in my first post. I think ASCAP were more fearful of going to the rate court, the onus falls on them to prove that the rate they want is reasonable rather than on the RMLC to prove that it isn't.

The way it was written by the author of the original post made it sound like ASCAP quickly agreed a deal with the normal radio stations but is now discriminating against Pandora. The RMLC/ASCAP argument went on for a long time, it's more than likely the situation will be repeated here with an eventual out of court settlement being agreed.

Understood.  And it seems that Judge Cote is less of a friend to ASCAP than Judge Conner.  Perhaps one more incentive for ASCAP to avoid rate court.

Would like to make one qualification ... Unlike the other PROs in the US, ASCAP is owned by songwriters and music publishers.  Its board of directors is made up of solely songwriters and music publishers elected by the membership every two years.

So, Pandora IS paying songwriters when they pay ASCAP.

"ASCAP is owned by songwriters and music publishers"

Then why don't they share their royalty distribution algorithm with their songwriter members? For fucks sake, I hope that a "member owned organziation" would be a little more transparent than pro-profit music outlets like Pandora and Spotify. But apperently that's asking for too much.

"Pandora is currently earning $100 million each quarter,"

Steve - I know what you mean but to use the word "earning" might be confusing to some.. Mabye use "generating" or something that refers to revenue becuase they still have negative earnings.. 

Unfortunately, no one thinks that Pandora's infrastructure costs as much as it does. "It's just in the cloud, isn't it free?"  Large scale databases are expensive to operate and keep up 24/7. They also don't take into account the costs of running a large ad sales group-- last I heard there were 80+ people selling ads for Pandora-- or the cost of all the analysts who classify and categorize music within the genome.

(Disclaimer: I hate being an apologist for Pandora)

Pandora has a negative bottom line every year... For a company with 400 mil in revenue it is sad they are not profitable...

 In reviewing these "hotly debated" new use licenses (Pandora, Spotify, Google, YouTube, etc.), I often wonder why someone did not more thoroughly investiget what was being created (the new business model), and perhaps been a little more creative and understanding as to the needs and requirements of both sides.

Perhaps by creating a formula that would have possibly better addressed the needs of the new company/technology - start-up by giving them licenses that contained a "deferment program". It could have provided low rates for a begining period of time and incresed over time and usage. By allowing a percentage of the rate to be deferred until the company reached specified levels of 
"gross revenues", after which the "deferred difference" would have to be "made up" and paid out to the PRO.  

I think this would have helped the copyright holders to maintain the integrety and value of their assests, benefited and compensated those "more valuable copyrights" and given the "Start-up" the time and financial room for developement and growth they so badly need in order to gain the foothold needed to develop their business.

And, Yes, there would be a "gamble", but no more or less than what copyright managers grant film production companies every day. Not to mention all the savings from not having to littigate ! ! !  

I have great respect for Steve Gordon and own one of his books and this is all important information to consider. All of this clarification of facts does not, however, change the basic reality that Ellen made a paltry $39 for 3 million spins. Regardless of teh complex mechanics at work behind the scenes, all that matters in the end if whether musicians and music creators can make a living.

She did not get 3 million spins. She got 3 million digital phonorecord performances. They are completely different numbers.

A single spin on a terrestrial record station is about the same as 20,000-50,000 performances on a top 20 market station.

Since Pandora is a semi-interactive service, there is no real equivalent to "spins" as everyone is hearing a single  radio stream.

It's important that we keep the facts accurate in this debate.

lets turn the argument around,

we Know Pandoras Gross, 

we know the artist's earnings,

we know the artist "plays" and thus should know the artists pro-rata % (no of plays/total no of plays)

maybe a finance wizard out there, can tell us based on the data in the article, what the artist should "fairly" receive for the number of "plays", while still leaving the business a margin to operate and give the investors a fair return on capital,

anybody?

The PRO's pay out different rates depending on when the song was played, how long the song was played, what demographic, etc.  A lot goes into what rate you received for your plays.