Pandora Is Now ‘Steering’ Stations Towards Lower-Cost Music…

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If you give Pandora a lower royalty rate, then your music will get played a lot more.  That’s part of a re-tooled ‘Music Genome’ algorithm that puts finances first, according to documents filed by Pandora in US Congress and the Copyright Royalty Board.

The process of shifting playlists towards cheaper content is being referred by Pandora as ‘steering’.The first beneficiary of this is indie label group Merlin, which recently finalized a private deal with Pandora that dips below federal rates.  The details of those deals have been blacked-out in the documents obtained by Digital Music News, though quick math shows that Pandora will be paying less than half the rates currently being requested by SoundExchange, which collects streaming radio royalties for labels and recording artists.

 

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Pandora has been lobbying and litigating aggressively for years to lower its royalty commitments.  Now, they’re doing it at the negotiating table: US copyright law allows parties to construct private royalty deals that supersede federally-established rates.

All of which means you’ll be hearing a lot more of bands like Interpol, The National, The Offspring, and Vampire Weekend, and less up-and-coming or bigger-label acts that are not part of the ‘steering’ deal.   “Specifically, Pandora can increase performances of Merlin-label tracks by as much as [blacked-out] without increased payments, which results in a decrease in the effective per-performance payment,” the submitted testimony continues.

“Pandora fully intends to increase spins of Merlin-label tracks by at least the required [blacked-out].”

 The Pandora testimony that details the Merlin deal is here.

 

27 Responses

  1. Anonymous

    keep in mind that you’re reading Pandora’s presentation of the deal as part of their filing to the copyright royalty board. do you think it’s a balanced portrayal of the deal? imagine if you will, how the written portrayal of a defendant authored by his defense attorney would read. same thing.

    last thought: you know why Merlin was founded and what their role is. provided that, ask yourself, do you really think that they entered into an agreement that would devalue music for a short term grab at some steered plays? if you think that’s what they are about, then ask why no Clear Channel deal? why no SiriusXM deal?

    • There is something...

      Hey, for once I will agree with you here !

      I can’t understand how in the hell Merlin is leading a “race to the bottom” on digital royalties. The same people who are supposed to fight Youtube’s streaming deal ? They just proved here they are a joke and worth nothing more than the major labels…

    • Paul Resnikoff

      That’s quite interesting. On one hand, Merlin and Caldas have forged a deal that gets money through the door, gives a lot more spins to indie artists, and seems to skip SoundExchange (not sure if you need them for a privately-structured deal).

      However, money was already coming through the door, so why forge a new deal? Yes, it does drop the value of that music way below what SoundExchange is asking for, but the entire contract is blotted out in this testimony. So what are they REALLY being paid?

      Caldas could be called a pragmatist. He also forged a deal with Grooveshark, which has now been ruled a massive copyright infringer by a federal court judge. I think the deal still stands (haven’t heard otherwise).

      • jj

        All Caldas did was give evidence to the Royalty Review judge of a lower “willing buyer/ willing seller” rate for everyone …, as exchange of monetary value for spins is called “payola” and is a recipe for a supeneoa to court. (so in effect, Caldas sold out ALL artists and songwriters in exchange for absolutely nothing..as the payola price is not an enforceable part of the deal).

      • Anonymous

        The 50% artist direct pay that artists have always received for Pandora airplay has been preserved in this license and therefore SoundExchange will be continuing to process & make payments to all artists as they always have.

        I think it’s important to point out that every Merlin member is eligible to opt-out of ANY Merlin license.

        Merlin is a 100% non-exclusive relationship. If a member doesn’t like a Merlin deal or thinks he can do better outside of Merlin we’re more than welcome to opt-out/not participate. Merlin exists solely as a digital licensing resource for members who believe that via Merlin we’re able to receive better terms for digital deals than we would on their own or via a for-profit distributor.

        Merlin costs nothing to join and membership doesn’t obligate you to anything.

        • There is something...

          This is not the problem… By doing this kind of deal, they just devaluate music at a time where labels should be asking for better rates ! How can indies blame YouTube for low royalties rates when Merlin negotiate that kind of deal with Pandora. It’s a very, very bad signal they send to all the digital business and they need to take the blame for that.

          • Anonymous

            …and you’re certain that you know that the Merlin-Pandora deal is bad because why exactly? Because someone looked at the heavily selective, self-serving (and heavily redacted) filing by a company that is obviously looking to paint the best picture possible to a panel of judges that they’re deserving of lower royalty rates? No disrespect intended but, really, everyone…take a breath!

            Every published word about this on all of the blogs writing about this deal is nothing more than uninformed conjecture.

  2. Anonymous

    Assuming Merlin took a good long look at opportunity cost and the numbers made sense, it obviously gives a better public appearance and provides them and each label and band more leverage when you ship tonnage!

    This can then become an intangible where a possible increase in fees and merch sales and higher sponsors and obviously better negotiating power, and of course the mob rules. Some grazing cattle sees more people supposedly listening to something and automatically their brain tells them it must be better, thus likely more listeners. It could result in somewhat of a snowball effect. If this accomplishes itself through no further expenditure in marketing, advertising and promotion, it would at first glance make a lot of sense.

    i think if anything it makes significantly more sense as a long play then some short term grab of anything.

    Just wild base guessing and postulating off the top of my head, but Merlin obviously needs to do a much better job of bullying and leveraging and acquiring equity where they can, else its a mismanagement of the collection of power.

    This also brings into question the validity overall of how the whole system is working and operating and only further goes to highlight the unfairness and inequality in the whole scheme of things.

    It is also concerning anytime you set precedent, especially when that number is lower. Pandora and others will use it as evidence in future negotiations to try and persuade the courts to lower the rate overall or for whatever deal they may be involved in. It also then could publicly be used by other entities to lower their rates.

    Giving way to force boosted numbers in return for a lower rate gives Pandora exactly what they want and essentially they have to give up nothing.

    Again, without knowing every last intimate detail of the thing…

    Thus ultimately leaving everyone little choice but to eventually venture into greasy illegal and unlawful actions in regards to information, property, tracking etc. etc. in order to make up the shortfall due to a poor digital network and complete unequivocal theft and destruction of copyright and intellectual property used for monetary gains by not only individuals but supposed legitimate corporations and their employees.

    – Justin Mayer

    Plum Minnow

  3. david lowery

    Pandora owns a terrestrial radio station. Don’t they? That makes them subject to FCC regulation. Doesn’t this qualify as payola?

    • Anonymous

      David, you’re pretending that these promises of increased plays in licenses is new and specific to Pandora. These same promises were a cornerstone to the Clear Channel direct licenses (with those steered plays appearing on their iHeart digital stations to stay compliant with FCC rules on Payola which apply only to terrestrial radio broadcasts) and SiriusXM in 2010-11 when they made it quite clear that they were going to move to a model where they “played more music from their directly licensed partners”.

      It doesn’t end with radio like platforms. Steered plays are part of almost every negotiated direct digital license (“negotiated” because, of course, the digital services don’t offer them in the non-negotiable, “sign it or else” deals they put in front of most independents / independent distributors).

      Cynical as this may sound, Merlin is simply providing representation and opportunities for their independent membership within the construct of today’s digital licensing marketplace. Further, for you to take the redacted and slanted testimony filed by Pandora which is obviously filed to present their best case to the CRB judges and turn it into fact to slam Merlin & make hysterical claims that this deal between Pandora and a very limited group of rights holders will negatively impact everyone’s royalties is pretty reckless.

      • Paul Resnikoff

        Frankly, I’m not sure of the exact definition of payola, that is, as technically defined by courts and Congress. But, my working knowledge is that it describes the prioritization or certain songs in exchange for cash or cash equivalents.

        Does this qualify? It’s a tricky question, and a highly technical one that would have to be battled out in the courts. The ‘cash equivalent’ would be the discounted royalty rate, which causes Pandora (yes, an owner of a terrestrial radio station) to prioritize certain content.

        Tricky arguments on both sides.

        • Anonymous

          Payola or whatever you want to call it happens in so many industries at so many levels.

          The mere fact anyone even talks about collusion being some sort of crime is laughable. The big wheel would not turn without it, and in my experience it isn’t such a bad evil thing people think it is, it just gets abused by assholes, but i tell ya, not only does the squeaky wheel need grease, the old hamster is getting real tired, shes laboring badly…

          The other thing that made me chuckle last night, was the Majors get to get in on Spotify and use and manipulate that to their advantage, increasing their net worth, using the platform to drive their artists faces in front of other faces, get more spins, acquire indys property for nothing which they subsequently make more money from, and all the while get higher royalty rates for their employees because of it.

          Merlin gets some more spins for their indy clients yet the rate ultimately goes down and it appears they do not get equity either. Who are all the shadow players in Pandora and who are Merlin truly working for? These are interesting and important questions.

          Anyways So i mean, basically since the Majors and their employees are continually allowed to not only get away but profit from serious copyright infringement among a multitude of other illegal and unlawful things. Meanwhile each individual not with them gets the royal screw job and if ever appearing for one blip on the Majors radars will get shut down and blah blah blah if you don’t run their gauntlet exactly how they want you to. Great meritocratic custodians of music? Not in my experience….

          Basically go be with a Major and get paid to break laws and be a criminal else be a fledgling poorly treated not cared about independent artist.

          Remove all content, tell em to shove it up their you know what, and do something else. If they dont immediately remove the content, raise right up and initiate lawsuits and as much media coverage as possible, just get all over them and make em sweat millisecond after millisecond. Then If they rethink their negotiations, the spoon is not for sale!

          There are so many ways to look at it, is Merlin acting and operating with their clients best interests at play and are they deep enough players to play 4 level chess, to be strategic like a War general in order to make the best decision in the present while providing the smartest play for the possibility of a prosperous future?

          I guess we will see what happens!

          Justin Mayer

          Plum Minnow

        • JUSTIN MAYER

          Payola or whatever you want to call it happens in so many industries at so many levels.

          The mere fact anyone even talks about collusion being some sort of crime is laughable. The big wheel would not turn without it, and in my experience it isn’t such a bad evil thing people think it is, it just gets abused by people, like everything else, but i tell ya, not only does the squeaky wheel need grease, the old hamster is getting real tired, shes laboring badly…

          The other thing that made me chuckle last night, was the Majors get to get in on Spotify and use and manipulate that to their advantage, increasing their net worth, using the platform to drive their artists faces in front of other faces, get more spins, acquire indys property for nothing which they subsequently make more money from, and all the while get higher royalty rates for their employees because of it.

          Merlin gets some more spins for their indy clients yet the rate ultimately goes down and it appears they do not get equity either. Who are all the shadow players in Pandora and who are Merlin truly working for? These are interesting and important questions.

          Anyways So i mean, basically since the Majors and their employees are continually allowed to not only get away with, but profit from serious copyright infringement among a multitude of other illegal and unlawful things, they never seem to have to face the music badum toosh ;).

          Meanwhile each individual not with them gets the royal screw job and if ever appearing for one blip on the Majors radars will get shut down and blah blah blah, so if you don’t run their gauntlet exactly how they want you to they make you the victim and publicly profit and succeed from it.

          Great meritocratic custodians of music? Not in my experience….

          Basically go be with a Major and get paid to break laws and be a criminal else be a fledgling poorly treated not cared about independent artist.

          Remove all content, tell em to shove it up their you know what, and do something else. If they dont immediately remove the content, raise right up and initiate lawsuits and as much media coverage as possible, just get all over them and make em sweat millisecond after millisecond. Then If they rethink their negotiations, the spoon is not for sale!

          There are so many ways to look at it, is Merlin acting and operating with their clients best interests at play and are they deep enough players to play 4 level chess, to be strategic like a War general in order to make the best decision in the present while providing the smartest play for the possibility of a prosperous future?

          I guess we will see what happens!

          Justin Mayer

          Plum Minnow

        • Emilie

          The anti-payola statute defines it as the exchange of “any money, service, or other valuable consideration” in return for inclusion of material in radio broadcast without an announcement. 47 USC 317. This seems to me like “valuable consideration”. I think the battle would be whether Pandora falls under FCC regulation as terrestrial radio. The Southern District of NY last May found Pandora didn’t qualify as commercial radio for the lower license. Would be really interesting to see if owning that one terrestrial station qualified it for prosecution.

  4. Remi Swierczek

    Time to finish bullshit games, it’s time to make united effort of influential stars (old & new) , labels and Radio to enact new fair use act. Shazam with 500 million users is by no means fair use, it’s barbaric activity below moral levels of theft or prostitution. NEXT DAY we can simply convert Radio, streaming, any bar or elevator to GIGANTIC music store.

    Music and lyric ID services like Shazam, Google or Sondhound, with over 2 billion happy and satisfied freeloaders should convert from fatal to business MOOCHES/PIMPS to gatekeepers/cashiers of new music industry.

    Larry Page has to realize or has to be forced to understand that music as a merchandise is worth 40X as much as any advertising around it.

    $50B YouTube as a hub of $100B music industry is relatively simple project.
    I suggest completion date of 12/31/2020

      • Remi Swierczek

        Thank you.
        Help in getting audience with L. Page, T. Cook or L. Blavatnik would be good staring point.
        All others are to little to rock the boat.
        J. Bezos would be #2 but has formally lost hope, interest or both.

  5. Anonymous

    As a copyright holder you should be able to make any deals you want, like more plays for less royalty.

  6. BamDing

    I’m sad to hear this. The genome project was really cool to discover new music based on the music and my likes. Financial considerations should change the music I hear.

    I discovered quite a few new bands that I would have never have heard otherwise through Pandora. I’m not sure how this deal is good for either the listener or undiscovered bands.

    – Seth Jackson, BamDing

  7. Someone, somewhere

    Merlin executives are rude. All of them. They don’t care about music. To the point you want to stop working with them because it feels like you are talking with people who are paid to lie to the artists as much as possible.

    ex-Merlin employee

  8. Mic Mell

    This economic practice is how prices are driven down.
    Today it is a bonus, but in 3 years it is the new norm.

  9. Dan

    Yet again that utter fucking retard Charles Caldas has proved what an imbecile him and his whole Merlin team are. Virtual Fourth Major my arse – you couldn’t negotiate your way out of a paper bag.

    Failed to get a YouTube Deal
    Took four years to get a Spotify deal and then at lower terms than most other Indies
    Don’t even have a relationship with iTunes
    Have just signed away $15M of members money and have virtually condemned every other Indie to the same rate at Pandora

    Congratulations on single handedly fucking over every Indie Label on the planet you set of retards.

  10. Jeff Robinson

    Isn’t that ‘Quid Pro Quo’? Clear Channel got busted for that when they were going to haze indie bands and artists to give up ANY royalties they might be owed to get played on Clear Channel stations.

    This sounds like the same deal if giving up royalties means getting more spins.

    PAYOLA.

    Is this under the FCCs jurisdiction?

  11. David

    If Pandora are offering this as evidence of a market price for ‘willing buyer willing seller’ rates, they must of course be prepared to give the same ‘preferential’ treatment to everyone. Which is logically impossible: it is like saying you will give everyone an above-average rate.

    Also, I wonder how Pandora will spin this to their listeners? And more importantly their advertisers, who are their real customers? Pandora’s schtick is that they give each listener an individually tailored experience, based on their unique revealed preferences. If they fail to mention that they are giving preference to some music for commercial reasons, they could be nailed under truth-in-advertising legislation.