Pandora = 37% of SoundExchange Revenues

Looks like SoundExchange needs Pandora more than ever, but are they milking this cow to death?

According to a recent calculation shared by Live365 lawyer Angus MacDonald, Pandora accounted for nearly 37 percent of SoundExchange’s 2011 revenues, up from an already-high 23.5 percent in 2010.

Back of the envelope?  A bit, though MacDonald seems to be in the right ballpark here.  The calculation first uses SoundExchange’s preliminary annual statements for 2011, then compares that to SEC-filed financial statements from Pandora.  SoundExchange reported year-2011 royalty revenues of $371,922,621 – from all sources – while Pandora pointed to annual payments of $136,346,980 in its annualized, 10K statement (specifically, ‘SoundExchange related content acquisition costs…’)

Which means, a 36.66 percent chunk, according to MacDonald’s math.  But wait: MacDonald looked at the numbers from another angle, and started uncovering all sorts of strange oddities.  For example, nearly 70 percent of SoundExchange’s year-over-year revenue gains are attributable to Pandora, and Pandora’s revenue commitments to SoundExchange more than doubled over the past year.

And that 37 percent figure most likely careens past 50 percent for internet-specific radio royalties.  SoundExchange currently collects non-interative royalties from a range of delivery formats, including satellite radio and cable-based radio.

That said, there may be some ‘financial irregularities’ to consider, especially given the ‘outside-looking-in’ nature of this exercise.  The largest seems to be that Pandora’s fiscal year doesn’t exactly match SoundExchange’s fiscal year, meaning there are a few non-overlapping months here.  But maybe that’s only a big deal to the accountants.

6 Responses

    • paul

      Actually that was the first question that popped into my mind as well. So MacDonald did some digging; it’s fairly massive according to what we’ve seen so far. Pandora+Sirius seems to be gigantic. I’m working on that article next.


  1. Cliff Baldwin

    This calculation doesn’t take into account the publishing fees Pandora and the others have to pay beyond SoundExchange, which is believed to be in the 4 or 5% of revenue range. What a terrible business to be in. Just terrible. Create a product that 125M people in the U.S. want to use only to be driven out of business by greed, unjustified costs, and legalese. Seems like Napster all over again…huge opportunity to delight music fans, pissed on by greed and an antiquated system of rights and royalties. Google may trample all over rights, but they get scale and monetization. If the music industry could just act a bit like Google themselves and take a long view, they could be the biggest, most viral and addictive “online service” of all. But they seem addicted to short term small checks and cocktail parties. Oh well, easy come, easy go.

    • I agree

      Why can’t music biz lawyers and accountants think about innovation and future developmaent instead of status quo and litigation? Oh yeah, I forgot they are lawyers and accountants.

    • sink to swim?

      Yeah… sink to their level [/sarcasm]

      Google needs to respect Human Rights, we don’t need to sink to their [Google] level.

      The “Music Industry” is a collection of vastly different (mostly small) companies, not a monolith collective that can turn on a dime, because each company has it’s own directions. The only thing the different music companies have in common is that they’re all being ripped off by Google…