Universal Music Publishing ‘Now Has the Power to Shut Pandora Down’

Perhaps the only question is why Pandora executives aren’t cashing out faster.

Because it’s becoming increasingly apparent that this company lacks a sustainable business model, even if they successfully force recording royalty reductions through Congress.

Enter Universal Music Publishing Group, which now looks like the second publishing behemoth to independently negotiate its rates with Pandora.  The first step involves the cancellation of digital performance contacts with ASCAP and BMI, already in motion.  The next step is creating a new deal with Pandora, on their terms.  “In order to ensure that our songwriters are fairly compensated, we believe the best approach is for us to negotiate directly with these services,” UMPG chairman Zach Horowitz told Billboard’s Ed Christman, with Pandora topping the ‘services’ list.

Which means that UMPG, just like Sony/ATV and EMI Music Publishing, are now staring Pandora in the eyes at the negotiating table, instead of working through a rate-constrained intermediary.  And if any of these mega-publishers decide they don’t like the terms, Pandora is obligated by law to withdraw the content or face massive copyright infringement penalties.  “I said it to you on Sony/ATV and it’s the same with Universal,” a top-level publishing executive told Digital Music News this morning.

“They can shut Pandora down if they want to.  So that’s your negotiating power.”

The question is whether publishing rates start to become untenable as a result.  We also talked to music industry attorney Steve Gordon on the matter, who conceded that a pullout was possible but that it was probably unlikely.  And, that UMPG’s rates would probably follow the precedent established by Sony/ATV.   “[Sony/ATV president] Marty Bandier just negotiated 6 percent, from 4 or 4.5 percent before, so he got a little more,” Gordon told Digital Music News.  “Marty is very public about not wanting to kill his victims, he just wants more blood.

“He doesn’t want to kill them, otherwise they won’t be producing blood that he can drink.”

The Sony/ATV renegotiated deal lasts for just one year, and UMPG is likely to start renegotiations later this year.

19 Responses

  1. Alex

    Simply put – ask for MFN against any other publishing deal on the table and call it a day. Then let that be the market rate. No use getting into any other negotiating tactics.
    BTW -Anyone saying “goodbye Pandora” isn’t seeing the big picture. The publishers can’t make any money by shutting the lights off.

  2. econ

    Funny how the present admisitration will go after InBev on anti-trust grounds so they don’t acquire Modelo, but will gladly look the other way on mega banks and mega publishers.
    Seems like the only logical investors in Pandora are music publishers. I don’t want to see government interference, I’d just like to see the mega publishers raise their rents to the point where they lose revenue. The only problem with that is when it happens they’ll be the first ones to cry foul and ask for a back-door bailout by petitioning the government to enforce the prices the publishers want. No mater which party is in power, they’ll cave to mega interest because that’s where the campaign money is.

  3. Nice Guy Eddie

    Pandora should feel lucky they don’t sell an actual product otherwise they would be suffering a bustout.

  4. Casey

    Why are you focusing on Pandora? They have the power to shutdown (or cripple) ANY service, including iTunes. This isn’t just Pandora. Everyone will have to negotiate new rates.

    • HansH

      This a continuing story….
      Wait a few days for the sequel. Universal Music Publishing “Now has the power to Shut Spotify Down…”

  5. Vail, CO

    Pandora is…
    Great for fans.
    Great for major labels.
    Great for Pandora execs.
    Not so great for Spotify investors.
    Not so great for artists.
    Not so great for publishers.

    • Casey

      Not so great for artists? They pay a lot better than broadcast radio and do not favor just the biggest artists.

      • Chris

        This is a great point. In the US terrestrial radio pays nothing (as far as I’m aware?) in the UK they pay far more than the (small?) amount Pandora does so why isn’t the US industry going after the commerical radio industry that exploits your content for free rather than Pandora who don’t?

        • Jason

          Because radio is different to consumer. With radio, you can’t pick a song on demand. Think of radio is like an advertisement for a song. If the consumer likes the song, they might purchase it.
          And yes, radio does pay. ASCAP and BMI collects and disperses money to artists.
          Pandora doesn’t pay dick people. It’s great for the consumer, but crap for the creators.

          • Casey

            Pandora is no more on demand than broadcast radio. You can merely request a song on either platform, but that doesn’t mean they will play it. Pandora does play more music you like, but that is hardly on demand.

            ASCAP and BMI don’t pay artists, they pay songwriters and publishers. Broadcast radio still leaves artists out in the cold and they still play only the most popular music.

  6. hippydog

    What the rates should be is debatable.
    How much Pandora helps ‘the long tail’ and ‘music discovery’ better than other music services is also debatable..
    Myself, I think it has lots of potential, (and right now DOES do a better job at ‘discovery’ then the others) and I hope the music industry keeps it around.. (IE: I hope it does survive)

  7. Butch T

    Why the overwhelming anti pandora / anti tech bias in Digital Music News? Is this the mouthpiece music copyright holders?