Sony/ATV ‘Now Has the Power to Shut Pandora Down’

It’s a scary statement for Pandora, but according to sources, an accurate picture of a radically different licensing landscape in 2013.

And one in which Sony/ATV directly controls an absolutely massive and critical catalog.  “This is a big win for Sony/ATV,” music industry attorney Steve Gordon told Digital Music News, referring to a recently-negotiated, 25 percent increase in Pandora royalties for 2013.

“Sony is not subject to any rate court, Pandora can’t go to court or Congress to tell Sony what to do.”

The bump-up itself is regarded as modest, but a highly-symbolic first strike.  According to another source within the publishing industry, the deal was quick and short-term (for one year), but sets the stage for some serious increases ahead (ie, starting in 2014).  And publishers have long despised the extremely low rates that Pandora is paying.  “This is the very tip of the iceberg,” the source told Digital Music News.  “The 25 percent bump is going to get higher after the first year deal.”

But how much higher?  Look a little closer, and this is ultimately a very lopsided negotiation: first, consider that Pandora absolutely needs Sony’s catalog to run an effective radio service.  And if they don’t pay what Sony/ATV wants, they can’t use it, by law.

On top of that, these people aren’t friends.  “They aren’t squeezing Pandora now, but they will,” the publishing source promised.

Another spelled it out more bluntly.  “Sony now has the power to shut Pandora down, that’s your negotiating power.”

All of a sudden, the Sony/ATV deal is spinning a number of unfriendly events in motion (at least from Pandora’s perspective).  According to one source, other major publishers are already preparing to negotiate their own, independent royalty agreements that will feature far heftier rates. Like the Sony/ATV deal, those will be separate from any ASCAP or BMI relationships, part of a direct-licensing monster that seems nearly impossible to contain.

Meanwhile, Pandora is actually suing the publishing community to lower its rates, specifically through an action against ASCAP (which further explains the ‘not friends’ part).  But ASCAP now has a real world, real market rate to point to, one that is substantially higher than what Pandora wants.  “Sony/ATV gained a point, it’s not that much, but it does establish a market rate,” Gordon continued.  “ASCAP is now in the position of counterclaiming.”

41 Responses

  1. Pete

    What you, Paul, are apparently not savvy enough to realize is that these record labels love the emergence of the Pandora juggernaut. They root for Pandora to do well. Sony now needs Pandora just as much as Pandora needs Sony. You also fail to realize that today’s news lessens the chance of Apple wanting to get in the mix.
    The “scary” news last month was that Sony and the other labels were going to give Apple a sweetheart deal and Pandora was going to be crushed. You can consider that now highly unlikely. It’s all Pandora.
    Everyone always said “Pandora’s competitors have no barrier to entry.” Well, say hello to the new barrier to enter Pandora’s streaming music space: higher royalty fees. They are turning out to be Pandora’s best friend because no one else wants to pay them (and correctly so) They are going to be what ensures Pandora’s dominance in the space.

    • Knees

      Pete, just a heads up that Sony / atv is not a label.Not trying to pick a fight just saying.

      • Moses Avalon

        Pete is right. 100%.
        This is great news for artists and a victory for the “old school/old guard” method of music business that some people think is dead and gone. This is effective collective bargaining and shows why large labels still have a place in the digital/Internet landscape.
        @Paul you know your stuff, but i am surprised that you are trying so hard to spin this into a negative story. This is great news on so many levels.
        And for those on here who wish majors would just die already, you might be missing an important point: these companies are the banks of the industry. You may not like paying your bank back the loan they gave you, but you sure-as-shit do not want then to close their doors. B/c if they do that means all the stores in your neighborhood are about to fold too.

  2. Brit expat

    if you want to talk about labels, which is somewhat irrelevant in this conversation, the labels hate pandora because Pandora gets fixed rates through sound exchange. its like operating in a regulated and controlled environment in pandora’s favor (yet they still keep complaining…)
    The labels on the other hand, love spotify, who, due to spotifys service requiring direct licensing with the labels because of level of interactviity, the labels get $100 million in advances.

    • Dolly

      Sound Exchange made way more money for artists and themselves in 2012 because of one company…..Pandora. Don’t be naive. Pandora is the best thing they got happen to them in decades.

      • Brit Expat

        like I said in my comment “the labels” implying the labels POV, not my own, which makes your comment of being “naive” unjust.

    • David C Lowery

      Above statement is not true. Soundexchange made way more off of Sirius/XM than Pandora.

  3. tippysdemise

    The royalty that Pandora and Sirius pay, and that SoundExchange administers, was engineered for the benefit of labels and performing artists, not publishers and songwriters, who benefit greatly from traditional, over-the-air radio. This is not to say that all parties should not benefit from the airplay/transmission of their intellectual property; only to note that there is a very specific structure governing these rights and their accompanying payments.
    Now that publishers and writers want their piece, the labels and performing artists are going to get squeezed. Perhaps the same would happen to publishers and writers should SRCOs and performing artists come knocking on the door of broadcast radio? The point is that those of us who make a significant amount of money each year as a result of the Digital Performance Right in Sound Recordings Act of 1995, and yet are absolutely invisible to commercial radio, stand to lose quite a lot. However, artists/labels/publishers should not be compelled to underwrite what increasingly looks like a flawed business plan in Pandora. We need someone with new ideas and who will, at the beginning, bring all parties to the negotiating table.

    • Truth

      Blah, blah, whine. I agree that you should root for Pandora to survive a long time. Your not going to do any better. Or you could go back to the way it was ten years ago.

  4. Casey

    I think this is being looked at too literally. Yes Pandora needs the catalog, but they also need Pandora. Pandora pays them quite well. Those little numbers add up.
    It is not just Pandora either. It is every single music service in existence. Even iTunes isn’t immune. Pandora is just the first to get hit up with the rate increase.

    • Jack Hammer

      Pandora doesn’t pay anybody “quite well.” Pandora pays peanuts and is constantly lobbying congress to help it (Pandora) get away with even lower rates. Pandora seems to think that artists and publishers should sacrifice their livelihoods so it can make more profit. Congress apparently didn’t buy it. I’m certainly no fan of Sony or any of the other big entertainment conglomerates, but in this case, I have to say “Bravo, Sony/ATV.” Someone needed to rein Pandora in.

  5. Finished

    These are not nice people. They have been laying in the fields waiting for this moment. It is a bunch of old men still upset at the invention of the MP3. Pandora will be a shell of what it once was as soon as Sony gets the upper hand.

  6. Jeff Robinson

    Maybe the view needs to be that Pandora uses multi-song magazines. What if users were only to stream 5 unique songs a day in a playlist from that site. Perhaps evolve that into complete access for a $75 a month fee per user.

    Less publishing to pay and user gets their goofy-grin for 20 minutes or so.

    I’m finding more and more restaurants relying on Pandora as their background music programming. That would stop instantly changing the policy.

    • Not so fast. :)

      I want to think that Sony, Sound Exchange, etc. are smart enough not to choke to death a goose that’s presently laying them golden eggs.

      • Jack Hammer

        ….ha-ha-ha-ha .. the “golden eggs??!!!” Now, that’s the most hilarious thing I’ve read in months !!!

    • Casey

      $75 per month user fee? That is insane.

      Pandora also has a service designed for restaurants or other businesses.

      • Jeff Robinson

        $75 per month is a value. The price should probably more around $100+. What do you pay for cable? How many channels do you get for what you pay? Look at the amount of programming choice available from Pandora across so many genres (think genre like cable channel).

        There needs to be some impetus for change and Pandora can frame this in the users mind much differently in a more productive way.

        • jw

          hahahahaha $75 per month. That’s hilarious.
          Have you just not been paying attention the last decade & a half? Hate to break it to you, pal, but you don’t get to arbitrarily decide the value of music. The market decides the value of music, & it’s not $75 per month. $75 per year, maybe, but not per month.
          Are there no market forces in your world? Do things like supply and demand just not exist?
          This kind of mentality is what has lead to the piracy problem.

          • FarePlay

            The problem is that pricing for copyrighted material is always reverse engineered. These companies like Spotify came up with a business model based on administrative, operational and marketing costs then propose they pay artists whatever’s left.
            Also, this market determines determines price proposition also has problems. Most of our existing problems are a result of unrealistic business planning, which includes pricing.
            It is the Pandora’s and Siris’ of the world that set the pricing threshold, then, if need be, pricing adjustments are made if necessary.
            The biggest problem for creative content is that it can’t be priced like hard goods and artists by nature are not business people. A great song may take twenty years to conceive, twenty minutes to write and ten hours to record.
            What’s that worth? What’s “Like A Rolling Stone” worth? We’ve already re-verted to a singles world and now they want to squeeze the value out of music with unlimited streaming, which will further limit revenue for artists.
            Not to mention destroy the possibility of having a real connection with an artist and their work.
            Do we really want to live in a Cliff Note World and have our entire lives contained on a hard drive?
            Not for me brother…

          • Jack Hammer

            No, people like you who want something for nothing is what has led to the piracy problem. It costs hundreds of thousands of dollars (sometimes millions) to produce and market an album, not to mention the time and effort put into songwriting, recording and touring (usually at a loss), etc. People like you, who have NO IDEA of what it takes to create, produce and market music are killing the industry. Pandora, like you, also wants something for nothing and its founder had the audacity to try to get Congress to help him screw artists even more … but congress didn’t bite. It is not — and should never be incumbent on the creative community to subsidize a business model for an ISP. With the advent of the digital age, artists and songwriters have already taken an enormous hit and it just keeps getting worse. If things continue the way they’re going, all you “free music” crusaders will just have to create your own music because nobody else will be interested in doing it for you.

          • Major's Problem

            You must run a label to have the view that you do Jack Hammer. It’s not companies like Pandora killing the industry. It’s the industry killing itself. The fact that it does take millions to market a single (just market, not produce. That number is insignificant compared to the marketing cost) is crazy. It’s the majors constantly outbidding each other that is driving up the cost to market a single. They are doing it to themselves and don’t even realize it. They control what they all are willing to pay not radio, not venues, not advertising mediums, themselves. Instead of consistently one upping each other they should all cut back what they are willing to pay and see how quickly their advertising and promotion costs would fall. It’s a self perpetuating cycle because there is only so much air time for songs to be played, magazines to advertise in and web banners to buy. They could be just as effective spending half the money they do now. Indy artists are finding so much success because they are providing a product that people actually want to buy. So fans a pulling them up through the system. Rather then the crap that major labels are producing as spending so much money to force down the system. They know this is the problem but no one has the balls to make the change. I wish Pandora and all the other companies out there the best of luck because with out them we would never be able to her the music that we want.

        • Visitor

          I don’t see why you need to devalue music so much. $1000-2000 a month seems more reasonable. Music is the food for the soul, it should compete with stuff like people paying their rent.

  7. DudeNoDude

    Pandora was created out of clay by Hephaestus. The four winds gave her life and the Olympians dressed her. She was given to Epimetheus, his brother Prometheus had told him never to accept anything from Zeus. Epimetheus either forgot Prometheus’ warning or didn’t listen to it. Pandora married him. Pandora was always a curious god. Zeus had given Pandora a jar she had no clue what was inside it. One day when Epimetheus was out, Pandora was so curious and anxious to know what was inside the box. Then she decided to open it. She was surprised to find what was inside. There were all of the things that would taunt mortals down on earth. There was hate, anger and jealousy inside the box that Pandora had opened. She quickly snapped the lid shut, keeping in the worst thing of all. Pandora is remembered as the mortal/god who let out all the bad things in the world.

    • GhostP

      …but not for Tim Westergren, Thomas Conrad, Joe Kennedy, et. al. They quite like this box.

  8. fake Tim Westergren

    finally found an internet connection on this dusty windy road on tour. This life, just so hard, blazing sun, I’ve struggled, just touring gig to gig, thankless, abusive audiences.
    Someone spare me ham sandwich my brotha!

  9. Stumped Again

    Hooray! Hopefully Sony can squeeze the life out of Pandora and squash an innovative company that tried creating a new model for the internet age and is currently introducing new artists to millions of people who otherwise would have never been exposed to them. Who needs them! Bravo Sony!

      • Jack Hammer

        At the “content creator’s” expense, of course. After all, why should the singers and songwriters get paid ? They’re all “rich,” aren’t they ? Just ask any thieving punk on the Web …

  10. dmn comment board: the gift th

    I almost spit out my lunch when I read the comment about $75 a month for Pandora. Discussions like these will be much easier when everyone realizes that the vast majority of people are just not willing to pay a lot of $ for recorded music. Piracy is just one of many factors, including the easing of the industry’s stranglehold on the means of distribution, a multiplying of the means of entertainment activities competing for consumers’ time and (decreasing) dollars, and a shift in the whole paradigm for music listening from the active to the passive. Before high-speed internet, smartphones, video games, cable and dvr, people used to sit around and listen – really LISTEN – to music for hours on end. Those days are never coming back. Sure, the decreasing value of music to society has in part resulted from the major labels’ abdication of their duty to create ART in exchange for being cultural gatekeepers, but who can really blame them when their upside has shrunk so dramatically.

    • Jeff Robinson

      10% of society thinks everything should be free on the internet.

      10% of society also backs Rand Paul and Ron Paul.

      That Tea Party mindset is sinking the ship.

      Do we want 10% of society to make decisions for the other 90%?

      Get over it.

      • Visitor Name

        It’s funny, the tech industry think like the 10%- or they throw out half-baked ideas for venutre capitalists to spend and subsequently lose money on. Steve Jobs thought you couldn’t focus group anything because people don’t know what they want, but the rest of his book was just fiction, right?

  11. come again?

    No one said music should be free. Poll your friends to see how much they spend on recorded music. I highly doubt they spend $75 a month. The same devaluation happened to the DVD market. Consumption patterns changes and the longer it takes to adapt, the longer the bleeding will continue unabated.

  12. Duh

    No wonder all the execs & their friends at techcrunch have been selling all their shares. Insider trading rocks.

  13. A know it all

    Shall I assume Marty and Sony ATV just help set a rate precedent and the result will that our PRO’s will fight for those same higher rates from Pandora? People don’t seem to understand something, WE DONT NEED STREAMING services if they can’t afford to pay the very people who provide the content that make these giant companies succeed by charging a fortune for advertising. GIVE US OUR CUT fuckers. 😉 Same goes for YouTube and the GOZILLION cover songs that have ads on them. YouTube has become a pathetic but profitable world of karaoke tracks and singers selling their version of hit tunes on Itunes/Amazon. My 9.1 cents 🙂

  14. CSC

    Thanks for the article Paul. It’s sad most people still do not understand the difference between label, publisher, and performance society. Congrats to ASCAP and the ability to fight for a new market rate.
    To most of you commenting here study the biz before making remarks. Sony/ATV is a publisher not a label. Learn how publishing works. It’s not easy and takes time.

    • Jack Hammer

      Exactly. A lot of clueless, little Commies on here who talk big but have NO IDEA about the complexities of the business, especially as it relates to the people who actually create and produce the music these “consumers” claim is so important to them … and yet is somehow worthless. The old adages are still true … you don’t get something for nothing … unless, of course, you steal it on the Internet. In the not-too-distant future, there will be far less music for consumers to choose from. Songwriters have to eat, too, and most of them will simply find a different (and non-digital) way to make a living.

  15. Jack Hammer

    Just look at that face. Now, THAT’S the face of an “honest” man.

  16. D. Staggs

    This should help to rebuild the system. alot of online companys
    using your music and your lyrics refuse to pay you direct for using them.
    We need to correct this its definatley cycber squatting, online infringement,
    and some more. What abou the Indie Artist, who gonna speak for us!!!!!