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.