(iTunes Americas contract for indie labels, page 41)
iTunes Radio has been alive for less than two months, yet its active listener base is already one-third that of Pandora. Which means, iTunes Radio will soon be just as big – and perhaps far bigger – than Pandora in a relatively short amount of time.
But is that a good thing? Here’s a category-by-category breakdown of exactly how each service treats its precious content partners, from the largest major to the smallest indie and artist. It all depends on where you stand.
(1) Ability of Rights Owners to Strike Independent Licensing Deals:
Pandora: In a word, impossible.
iTunes Radio: Easy for larger rights owners (like major labels); very limited for smaller rights owners.
(details: Pandora has fought aggressively against individual publishing deals; forcing publishers to fall back on lower, federally-mandated ‘consent decree’ rates (see this court decision). Apple has gladly arranged individual licenses with both larger recording labels and publishers; unconfirmed information also suggests that Apple is striking independent deals with all publishers, but not smaller recording labels (see Apple iTunes Americas contract for indies).
(2) Presence of a released CD required for inclusion:
Pandora: Yes (and actively sold through Amazon)
iTunes Radio: What’s a CD?
(details: Pandora has held this policy for many years; Apple doesn’t sell CDs and frankly doesn’t care about them, though they do require downloads to be sold on the iTunes Store (see Apple iTunes Americas contract for indies).
(3) Presence of released download required for inclusion:
Pandora: What’s a download?
iTunes Radio: Yes
(details: according to clearly spelled-out details in Apple’s contracts to indie labels, iTunes Radio inclusion can only happen if the content is already available on the iTunes Store. No exceptions, except perhaps for the largest major labels (see Apple iTunes Americas contract for indies).
(4) Ability to up-sell to paid downloads:
Pandora: Yes, with significant usability snags and problems
iTunes Radio: Yes, automatic with high ease-of-use
(based on DMN usability testing; October 2013)
(5) Per-stream payouts (recording):
$0.0012 per song in 2013 (increases $0.0001 per year; $0.0014 by 2015; with label/SoundExchange lobbying pushing to greatly increase this rate)
Major labels (and many publishers) negotiated their own deals, reportedly with handsome advances. Outside of that 1%, here’s the deal:
$0.0013 in Year 1 + (Monthly Company Share x 15% of Net Advertising Revenues)
$0.0014 after that + 15% of Net Advertising Revenues)
A minimum of: Monthly Company Share x 45% of Net Advertising Revenues and (a) $21.25 in Year One; $22.25 in Year Two.
(details: in the case of Pandora, this is based on federally-mandated statutory rates (more background here); Apple determines rates for larger recording owners in private, individual contracts, while indies are handed lesser terms (see Apple iTunes Americas contract for indies, which forces pre-determined payouts and terms to all but the largest rights owners.))
(6) Likelihood of Actually Getting Paid:
Pandora: Moderate chance.
iTunes Radio: Also ‘Moderate’.
(details: this is a complicated soup and depends on the exact deals and structures involved. Pandora processes recorded music payments through SoundExchange, which forces a percentage of payouts to artists and performers. Sounds like a welcomed change, though SoundExchange’s payout process and metadata situation is a mess and the company is notorious for holding a shockingly-large bank account of unpaid balances. Label deals, which also fall outside of Apple’s direct purview, can also be equally unreliable.
In the case of Apple, artists have already uploaded to the iTunes Store with existing payout schemes, but label payouts are another animal entirely. Of course, if you’re the actual label, you get the money first!)
(7) Per-stream payouts (publishing):
4.3% of revenues paid (pro-rata) to ASCAP, BMI and SESAC (for the year ended Jan. 31, 2013 (source)), per recent federal court decision.)
(for more details on this, see the decision of Pandora’s recent federal court victory against more expensive publishing deals).
10% of revenues paid pro-rate to individually-negotiated, major publishers (source); this also may include independent publishers as well.
(sources: Billboard anonymous sources, Digital Music News anonymous sources)
(more details: Pandora clearly loses in this category: the company has actively battled against independently-negotiated publisher deals, on numerous fronts. That includes federal courts and Congress. Furthermore, Pandora is now pushing for a drastic discount on all publishing rates by purchasing a tiny South Dakota radio station (which would qualify them for far lower, terrestrial rates).)
(8) Ability to Opt-Out Entirely:
iTunes Radio: Possible, but not without also removing content from the iTunes Store.
(details: federal law mandates streaming usage across recordings/publishing; publishing exclusions from ASCAP, BMI, or SESAC can be extremely difficult. Apple forces iTunes Store inclusion for all iTunes Radio participants (see Apple iTunes Americas contract for indies))
(9) Who’s More Completely Confusing?
A large percentage of Apple’s deals are private; then again, at least you know what you’re getting paid and you don’t have to consult with a federal judge or Senator. With Pandora, per-play payments wind through an opaque and difficult SoundExchange payout system, while the company is constantly trying to lower rates through multiple mechanisms (court decisions, endless Congressional bills and hearings, not to mention creative loopholes). Even Pandora founder Tim Westergren drafted letters promising increases to artists… that is, after rates were lowered (which would of course make it easier for Pandora to make more money, and pay artists more… any questions?)
(10) Usage Rules Around Your Content:
Up to 6 skips per hour; 12 in total per day across all stations (source: Pandora)
(note: the per-day number increases for premium, Pandora One subscribers)
iTunes Radio: Up to 6 skips per hour.
No rewinding, backward skipping or re-starting will be permitted (but resuming a paused song shall be permitted).
(source: federally-codified usage parameters; Apple iTunes Americas contract for indies).
(11) Payment Schedule:
Pandora: Quarterly, via SoundExchange.
iTunes Radio: Monthly.
(details: “SoundExchange distributes money quarterly (March, June, September, and December), per SoundExchange’s site; “Payments and the related Sales Reports shall be made monthly, per Apple iTunes Americas contract which pertains to most indies. Oh, and when it comes to publishing/PRO payouts, you’re on your own!)