Fun Fact: Pandora Pays Songwriters Just 4% of Revenues…

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The following guest post comes from David Israelite, head of the National Music Publishers’ Association (NMPA).  Currently, Pandora is fighting major publishers and PROs to lower the rates paid to songwriters.

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In a New Year’s message to listeners, Pandora’s CEO called 2014 the “year of the working artist on Pandora.” He suggests that events last year were positive for those trying to make a living on his streaming site.

In reality, 2014 was the year of the music creator standing up to streaming on behalf of working songwriters. Not to mention, Pandora fighting tooth and nail in court and Congress to pay them even less.

Pandora’s CEO is quite literally banking on a few things. First, that music fans don’t understand recording artists and songwriters are paid differently – so by saying “artists” are treated well, folks will assume everyone is being compensated. Nothing could be further from the truth.  While artists and record labels receive a respectable 50% of Pandora’s revenue, songwriters receive only about 4%.

Second, he is hoping that fans won’t notice that Pandora has gone to court twice to sue to pay songwriters less.  Less, even, than the $2,700 in songwriter and publisher royalties earned from 43 million streams of Pharrell Williams’ “Happy.”

A far cry from the “year of the working artist,” the true hallmark of 2014 was that famous singer-songwriters said ‘no’ to streaming that treats songwriters unfairly.  Taylor Swift made news with her bold declaration against the degrading royalty rates paid by Spotify, saying, “I’m not willing to contribute my life’s work to an experiment that I don’t feel fairly compensates the writers, producers, artists, and creators of this music.”

Jason Aldean followed suit, declaring, “I’m an artist whose career has been built by the songwriters, publishers, producers and engineers that line Music Row in Nashville. What they do has value, and I want everyone who is involved in making my music to be paid fairly. This is about trying to do what is right for the people who have given me a great life.”

Luckily, Swift and Aldean, who are both songwriters and recording artists, have the ability to take a stand by pulling their songs from Spotify. Were they exclusively songwriters, they would have no choice due to decades-old government regulations.

Simply put, without big-name artists like Swift to speak for them, the songwriters behind the music often have a much a weaker voice.

So why don’t songwriters get a fair shake from streaming? In the case of Pandora, while recording artists have some ability to negotiate their rates, songwriters have none.  As Aloe Blacc, the co-writer of Avicii’s hit “Wake Me Up,” said,

“by law, we have to let any business use our songs that asks, so long as they agree to pay a rate that, more often than not, was not set in a free market. We don’t have a choice. As such, we have no power to protect the value of the music we create.”

Considering this, how does Pandora still claim to benefit creators? Pandora’s CEO referenced the supposed marketing value of his site in his address too listeners, writing, “Pandora has become a real home for artists that have never had this kind of audience before.”

Pandora will continue to claim that publicity garnered by being on its platform is payment enough.  But that publicity only turns to revenue when it manifests itself in album sales, which are drastically in decline as streaming takes over as the music-listening medium of choice.  Streaming itself is becoming the dominant revenue stream, which is why Pandora’s payments – not its supposed exposure value – are critically important.

Ironically, Pandora is competing with and overtaking the actual purchasing of music, while claiming it spurs sales.

Ultimately, no amount of publicity is worth giving up any chance at earning a living. And just how much benefit do artists get from plays on Pandora? Shockingly little. In fact, Pandora released a study last November touting the “Pandora Effect” which revealed that “For new music, the positive effects were 2.82 percent for majors and 0.62 percent for independents, although the latter was not statistically significant.” So what is the real Pandora effect? Little to no jump in sales, and a royalty for songwriters so small that even successful ones can barely make a living.

Pandora’s CEO says confidently that it’s “very exciting to think about the impact internet radio can eventually have on the future of these talented and deserving artists.” He goes as far as saying, “If we do it right, together we can really make a difference for them.”

The difference for songwriters will be that instead of achieving a fair, negotiated royalty rate for their songs, they will be dictated to by a massive corporation that fights to keep archaic government regulations in place in order to pay them less and less.

My hope is that instead of trying to convince music lovers that they’re doing something good for songwriters and artists by listening to Pandora, its CEO will actually do something good by starting to pay them fairly.  Perhaps Pandora’s New Year’s Resolution could be to value creators so that songwriting and streaming can thrive this year and the next.  Let’s let 2015 be ‘the year of the working songwriter on Pandora.’

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David Israelite is the President and CEO of the National Music Publishers’ Association (NMPA). Founded in 1917, NMPA is the trade association representing American music publishers and their songwriting partners.

Image by Simon Bleasdale, licensed under Creative Commons Attribution 2.0 Generic.

 

61 Responses

  1. Avatar
    N

    Why does Pandora get to set teh rates for songwriters? Why doesn’t Pandora pay a total amount for a given song, then let the various parties (writers, recording artists, etc) split it up however they want?

    • Avatar
      FWIW

      Pandora doesn’t get to set the rates they pay for music. They are subject to a rate setting procedure that is overseen by the Copyright Royalty Board (“CRB”). The CRB is a 3 judge body that is appointed by Congress. All interested parties submit evidence/testimony and the CRB sets the rates (for both master/performer statutory royalties and publisher/songwriter statutory royalties).

      What Mr. Israelite leaves out – and it’s glaring – is that for over 70 years statutory rates for songwriters covering when compositions are used by radio, in bars & restaurants, on tv, etc., etc. have made publishing royalties billions of dollars, have made it so that there is little to no obstruction to getting compositions to market, and created a level playing field that insured that an unrepresented songwriter with 1 composition is paid the same per play royalty that a superstar songwriter gets paid.

      Pandora does pay an appallingly low songwriter royalty. That’s a fact. But every part of Mr. Israelite’s agenda here is a Trojan Horse. The NMPA’s effective lobbying and PR effort is all being directed by major publishers like Marty Bandier of SonyATV who want to abolish statutory rates so that major publishers can do what major labels are doing in the digital space which is to hold up services in direct licensing negotiations which will result in deals that will surely be cloaked behind non-disclosure agreements (“NDAs”) and will line the pockets of the major publishers at the expense of songwriters and independents.

      Songwriters and independent publishers: be upset that Pandora is paying a paltry songwriting royalty but don’t fall prey to this blatant opportunism being pushed by major publishers to use this ONE bad rate setting as an avenue to forever make you subject to the guessing and unlevel playing field that performing artists and independent labels live within now.

      • Avatar
        Anonymous

        That’s a great explanation, thanks for sharing. Because you seem knowledgeable on the subject, I have a question for you as well. I don’t have any agenda on this issue, so please don’t read anything into this – I’m just genuinely interested in your thoughts.

        From your answer to that question, I assume that you like that the CRB creates a “level playing field” for songwriters; you also seem strongly opposed to a situation where major publishers can exert control over the market by entering into confidential deals that leave independent songwriters at a disadvantage.

        I understand your opposition to the latter situation. But on the other hand, I’m not sure I understand why all songwriters should get the same per play royalty regardless of experience or success. I assume there’s tremendous variation in songwriters, both in terms of inputs (skills, time spent per song, perhaps an intangible “talent” factor, etc) and outputs (popularity/commercial success of typical work), as well as variation across individual songs from a single songwriter. This isn’t unique to songwriters – some teachers are better than others, some doctors are better than others, etc. It seems like any system that takes an entire profession and declares that they all get paid the same rates is going to result in underpaying some individuals and overpaying others.

        My question:
        Do you think there is any way to introduce individual control over per play royalties without totally screwing independent songwriters?

        • Avatar
          FWIW

          One consideration I’d raise: just because the level playing field I support results in the same PER PLAY royalty for songwriter A and songwriter B it doesn’t mean that there isn’t a meritocracy in place that puts more money into the wallet of the “better” songwriter. It stands to reason that the better songwriter’s music would be played, used, consumed more frequently than the lesser songwriter and therefore would make more total money.

          I’m just another voice in the din but FWIW I’m not against conversations about varying per play royalties that, for instance, escalate as a song is played more frequently (therefore becoming more “valuable”).

          But to stay on message, all I really wanted to get across in my post is that I don’t want songwriter royalties to go from a transparent, level playing field statutory basis to the NDA cloaked, directly negotiated rates that favor major publishers at the expense of actual songwriters and independent publishers.

          I reiterate: be angry about the rate setting that allows Pandora to pay such a relatively paltry rate but don’t let your anger over this one rate setting blind you to the fact that a statutory royalty is far better than trusting that major publisher bosses (and their well paid mouthpieces like David Israelite) have your best interests in mind.

          • Avatar
            Sarah

            How about a transparent, level playing field where everyone gets to negotiate their own rates? A level playing field just means you have the same opportunity to compete – it shouldn’t mean everyone’s rates are the same. Maybe you’re a better songwriter and can get paid twice as much as the next guy; if your song is a hit, you’ll do twice as well as you’d have done under the “uniform per play rates” model. It also opens up the possibility of niche songwriters making more money because income isn’t dependent purely on popularity.

            Anyway, that’s what we’re shooting for with our platform. We were inspired to do this by YouTube’s treatment of indie labels over Music Key.

            We should avoid most of the problems inherent in that model because we’re using a radically different business model. But we’re considering various methods of assurance, so that you don’t have to just take our word for it and hope we never turn evil.

            For instance, we’re considering putting into our contracts a term stating that there aren’t NDAs with regards to labels on our platform; in the event we make a different deal with one label, every other label on the platform gets to see the terms.

            It’s an interesting problem: we have really good intentions, but we want to design a system that will remain fair even if one day we (or other people running the company) don’t have really good intentions.

            We’re opening our site to creators in a few days (it’ll open to consumers a few weeks later), and we’ll be asking creators – including indie labels – for feedback on everything from policy (like the “no hiding behind NDAs” policy) to product features. We obviously can’t make everyone completely happy, but our goal is to come up with a fair system. Your opinion would actually be worth quite a lot to us, I hope you’ll take the time to check out what we’re doing and share your thoughts. 🙂

          • Avatar
            FWIW

            From your lips to God’s ears, Sarah. I’ve read your comments elsewhere on DMN and am anxious to learn more about your platform when it becomes public. I wish you good luck.

            That said, unless you’re foregoing music distributed by the majors the licensing path that lies in front of you is as unenviable as can be. They aren’t interested in new platforms, new avenues for music to reach consumers and especially not in new, more fair economic models. They want guaranteed (huge) revenue and they want it up front. For a start up biz – even if it’s launched by Google or Apple – they want the financial risk to be all yours. “You want our music to power your new platform? Sure. Pay us $xxxxxxxxxxxxx up front as a deal fee. Guarantee us $xxxxxxxxx every quarter whether our music performs on your service enough to earn that amount or not. Oh, and how about we own xx% of your business for doing you this little favor?”

            The statutory royalty structure isn’t perfect. As I’ve said, Pandora is riding on the backs of songwriters with the current composition rate. But any failing of a stat rate is fixable, eg. if a current rate is bad, look forward to a new rate setting. Once rates are set by private, NDA negotiated direct licenses that include required deals with the majors, the problems are myriad and fixed in stone…and fixed to enrich expensive executives and quarterly earning statements at the expense of creators (be they songwriters or performers).

          • Avatar
            Sarah

            You hit the nail on the head.

            There are a LOT of independent artists and labels, and they produce a LOT of great content. We see no reason to court the majors. We don’t really want ’em at this time, and they have happy homes on Spotify and YouTube.

            Assuming our platform is successful, the majors will almost certainly want to come on board later (you’ll see why). And when they do, they can use the platform on the same terms as everyone else. There’s just no possibility of advance payouts, guarantees, or equity in our business model (again, you’ll see why). The end game for this is a platform where everyone, from Zoe Keating to Universal, is playing on a level field under the same terms. We don’t guarantee anyone success – that’s up to you – but we hope to guarantee that everyone gets a fair shot at succeeding on our platform.

            The reason I’m cryptic is because we’re doing something radically different, and explaining it in bits and pieces just doesn’t make sense – it invites all sorts of confusion and objections. The only way to get a fair idea of what we’re doing is to see the big picture, and we’re not quite ready to make it public. When we are, we’ll do our best to be the most forthcoming, transparent company you’ve ever dealt with. As far as we’re concerned, we’re on the same team. 🙂

          • Avatar
            Rex

            “For instance, we’re considering putting into our contracts a term stating that there aren’t NDAs with regards to labels on our platform”… I believe when I “see” it.

          • Avatar
            Bill Tuck

            Hi Sarah,
            I am a songwriter but have stayed away from streaming and social media services in general (with the exception of Music Xray) until there are better options out there. I would really like to learn more about your new service. How can I make that happen?
            Sincerely,
            Bill Tuck

          • Avatar
            Sarah

            Hi Bill,

            I’m thrilled to hear you like the sound of what we’re doing. We aren’t saying the name of the company yet because our website isn’t public yet – that means anyone who goes to it is going to get a plain “coming soon” sign, which isn’t a great first impression. But we’re working around the clock to get the final details sorted out, and expect the website to be ready for public viewing in a matter of days.

            Here’s how it’ll work:

            We’ll open the marketing site first, not the actual platform. On the marketing site, you’ll be able to read all about what we’re doing, why we’re doing it, and how we’re doing it. We’re going to unusual lengths in terms of transparency – we want everyone who uses our site, creators and consumers alike, to know exactly what our deal is and how we work. You’ll be able to pre-register as a creator; that means we’ll probably contact you and offer to give you a private demo, and discuss with you what we’re doing to (1) make sure we’re explaining it well and (2) hear any objections/concerns you may have. As Anonymous loves to point out here, we aren’t professional artists ourselves – that means we can’t just assume we already know best about everything, we have to actually ask people who are, like you.

            Then we’ll open the actual platform to creators who pre-registered. You’ll be able to upload content, play around with the features, and get a feel for everything. Again, we’ll communicate with you to get feedback on what you like/don’t like/want, etc. Team effort 🙂

            Then we’ll open the platform to consumers, focusing on the fans of our creators.

            From launching the marketing site to initial opening to consumers, we’re estimating a 2-4 week timeline (don’t hold me to that, surprises happen).

            But if you’re interested, I’d love to talk to you privately and give you the details before then. If you point me to a website or email I can use to contact you, I’ll be in touch. When our site goes public, I’ll also put my email address in comments on this site so you can contact me directly.

            Best,
            Sarah

          • Avatar
            Bill Tuck

            Thank you Sarah! You can email me at billtuck +….+ wellofkingsmusic +….+ com
            I look forward to hearing from you.

          • Avatar
            Sarah

            Bill,

            I’ll be in touch later today. I look forward to talking with you 🙂

            Best,
            Sarah

          • Avatar
            Bill Tuck

            Thank you Sarah. I just tried to leave my email address here, but I either did something wrong or maybe it’s a violation of this website’s terms (I admit to not having read them yet). So a kind of circuitous way to do it is search “bill tuck songwriter” via google, click on “Maybe Love Is Not a Revolution” (hosted at Music Xray), and then click the “License” button, which has my email address. I look forward to hearing from you!
            Bill

          • Avatar
            JoeMecca

            Sarah,
            I have a different take – all song writers can take what they want, if the consumer isn’t willing to pay for it (that’s where the money comes from) then the artist receives nothing. The artist has the right to provide music through there own website and carry the expense of managing the website and pay all the accountants, advisors, etc. No one is entitled to all the money, every business model has it’s own set of costs and trying to strike the balance between what the consumer is willing to pay and how much everyone is going to receive is a tough business.
            Once again, you and everyone out there has the right to set up their own shop. Apple Music has a different approach, once you buy the single or album, every replay in the stream plays from the record the artist sold you and no more royalties after that.
            Another good approach would be to allow every listener to decide how much they want to pay the artist directly through pandora or Apple music so that you can directly decide how much the artist is worth and pay a flat fee to the streamers for hosting the platform for the artists. I think this would be a good solution for folks who feel they should pay more money to listen to music.

          • Avatar
            Paul Resnikoff

            I’m just another voice in the din but FWIW I’m not against conversations about varying per play royalties that, for instance, escalate as a song is played more frequently (therefore becoming more “valuable”).

            That’s well-stated; at the heart of this is a uniform structure that everyone can participate in — or, actually, MUST participate in. An escalating rate would reward more valuable songs and more talented songwriters, but as a uniform rate it wouldn’t lead to the massive, closed-door, opaque negotiations on the recording side that leads to all sorts of other inequalities and bad behavior.

          • Avatar
            Name2

            I’m just another voice in the din but FWIW I’m not against conversations about varying per play royalties that, for instance, escalate as a song is played more frequently (therefore becoming more “valuable”).

            No streaming company would agree to those terms. It’s a built-in brake system on their capacity for growth.

            In fact, if I were a streaming company I’d tell the publishers to accept a cap or lower rate AFTER x-million streams. Otherwise the streaming company is just another direct money-delivery system to the most entrenched, successful artists. If the potential is there to start having half your payouts go to a half-dozen publishers, then let the publisher take their ball and go home: they can set up their own streaming service (Hi, Irving Azoff!) with their own clients, and have a party.

          • Avatar
            Sarah

            You’re right, that wouldn’t work for streaming companies under current business models. In fact, the current system doesn’t work for streaming companies – it’s a bad business model. Streaming services are running on hope, in the form of cash from investors. I’m not suggesting that streaming will go away – it’s probably going to remain the dominant form of consumption for the foreseeable future at least.

            But the current implementation of streaming – the subscription/ad-supported “all you can eat” business model – doesn’t have a very good chance of surviving over the next 5, 10, 15 years because it’s a losing system. It’ll be interesting to see how it plays out.

          • Avatar
            Name2

            Data-compromised (MP3, AAC) music is overvalued.
            Non-interactive music (“radio”) is overvalued.

            I used to download those giant SXSW performer torrents which would get released shortly before the festival, and included several hundred songs. Most were utter crap. Because music that someone else is picking for you is always crap.

            But this is apparently swimming against the predominant tide. We’re all living under a system where it is impossible to make streaming pay as if it’s always been this way. We’re living under the corporate bedtime story that a crappily-compressed crappy song has to be paid for for each and every set of ears that hear it.

            These presumptions are just wrong.

          • Avatar
            Sarah

            Yep. I agree 🙂

            Please share: what do you think the optimal model for streaming is?

      • Avatar
        Name2

        Exactly. Nothing but a manipulative propaganda piece written by a lobbying firm.

        But then, that’s DMN.

        • Avatar
          Paul Resnikoff

          We also published the manipulative propaganda piece by the opposing lobbying firm, here.

          Giving both sides an equal floor. But then, that’s DMN!

          • Avatar
            Name2

            You also headlined the NMPA piece “Fact: […]”

            No preferences there. Nope.

          • Avatar
            Paul Resnikoff

            Well, you can read both, right here on Digital Music News. If Pandora has a retort to this, I’ll publish that, too.

            So, yeah, I’ve got opinions on this stuff, but I’ll let both sides get aired. So, I ask you, what’s your point?

          • Avatar
            Name2

            I have nothing to add to what FWIW posted early in the thread.

            If you think posting opposing-camp press releases means something – ones which aren’t even talking about the same topic – then by all means, go ahead. It’s a free country.

          • Avatar
            Paul Resnikoff

            We’re not talking about anything; I’m giving up. The real debate is up there, with FWIW. I’m joining that one.

          • Avatar
            Musician Who Understands

            FWIW may be right about Israelite’s agenda, but he’s entirely wrong about how songwriters’ perfrmance royalties get set. They do NOT get set by the CRB. The CRB sets the rate for sound recordings that are performed. NOT songs.

            The royalties paid for song performances are set by negotiation with the Performaing Rights Organizations (“PROs”) ASCAP, BMI and SESAC (and Azoffs’s GMR, now) – and, in the case of ASCAP and BMI, if those negotiations aren’t successful, then the case goes to Federal Court in New York. ]

            The fact that SO few people understand even the basic mechanics of how this works – yet feel entirely free to chime in and state mis-truths, half-truths and outright falsehoods – is one of the reasons why this site is so painful to visit. And why, once all of this gets fleshed out in front of Congress and staff and the REAL facts are revealed, songwriters and their constituents find themselves then fighting an uphill battle.

            But moving on, let’s take a look at some of Israelite’s one-sided statements, and fill them in with all the information:

            Israelite – “In a New Year’s message to listeners, Pandora’s CEO called 2014 the “year of the working artist on Pandora.” He suggests that events last year were positive for those trying to make a living on his streaming site. In reality, 2014 was the year of the music creator standing up to streaming on behalf of working songwriters. Not to mention, Pandora fighting tooth and nail in court and Congress to pay them even less.

            Pandora’s CEO is quite literally banking on a few things. First, that music fans don’t understand recording artists and songwriters are paid differently – so by saying “artists” are treated well, folks will assume everyone is being compensated. Nothing could be further from the truth.”

            TRUTH/FACT – Pandora’s CEO didn’t say anything about songwriters’ vs. performers’ payments. Not. One. Word. The FACT is, that Pandora pays BOTH songwriters AND performing artists, for streaming (a fact that Israelite sheepishly acknowledges, just one line later…?). Pandora pays BOTH of these royalties, while terrestrial radio ONLY has to pay ONE of them (the songwriter royalty). If songwriters have a problem with the relative value of those royalties, that is NOT Pandora’s problem.

            Israelite – “While artists and record labels receive a respectable 50% of Pandora’s revenue, songwriters receive only about 4%.

            TRUTH/FACT – Again, the relative value of those royalties is NOT Pandora’s concern (beyond how they sum up to Pandora’s total aggregate royalty obligation). Pandora nevber talks about the royalty split. they DON’T CARE. If you told Pandora that they have to continue to pay the same total amount (65% – 70%) in royalties, but that going forward, 90% would go to songwriters and only 10% would go to recording artists, they WOULD NOT CARE.

            Israelite – “Second, he is hoping that fans won’t notice that Pandora has gone to court twice to sue to pay songwriters less. Less, even, than the $2,700 in songwriter and publisher royalties earned from 43 million streams of Pharrell Williams’ “Happy.”

            TRUTH/FACTS – a) Pandora pays MORE that terrestrial radio does, for song performances. The rates that they pay to ASCAP, BMI and SESAC are HIGHER than the rates that Clear Channel, Ennis or any other terrestrial radio broadcaster pays.

            What Israelite conveniently fails to mention is that the VERY SAME entities that Pandora “went to court” with were the SAME entities that 1) the court found were actually colluding, trying to force Pandora into a position of copyright infringement, and who 2) had just AGREED to give terrestrial radio a lower rate (see the 2012 agreement with the RMLC.

            b) This is – again – IN ADDITION to the royalties that Pandora pays to recording artists, which none of those terrestrial radio stations have to pay, at all.

            Israelite – “A far cry from the “year of the working artist,” the true hallmark of 2014 was that famous singer-songwriters said ‘no’ to streaming that treats songwriters unfairly. Taylor Swift made news with her bold declaration against the degrading royalty rates paid by Spotify, saying, “I’m not willing to contribute my life’s work to an experiment that I don’t feel fairly compensates the writers, producers, artists, and creators of this music.”

            TRUTH/FACT – I doubt anyone seriously considers Taylor Swift a “working artist” in the sense that Pandora’s CEO offered the term. Swift is worth $200,000,000 – PERSONALLY. If Israelite had actually read Westergren’s message (or cared not to intentionally mischaracterize it) he would know that Westergren is explicitly talking about those artists who CAN”T find an outlet through traditional radio and record company promotion, as Swift has so richly benefited from. That’s the “working artist” he’s talking about and hoping to help. Not the multi-millionaire, platinum-selling, mega artist.

            Israelite – “So why don’t songwriters get a fair shake from streaming? In the case of Pandora, while recording artists have some ability to negotiate their rates, songwriters have none. As Aloe Blacc, the co-writer of Avicii’s hit “Wake Me Up,” said,

            “by law, we have to let any business use our songs that asks, so long as they agree to pay a rate that, more often than not, was not set in a free market. We don’t have a choice. As such, we have no power to protect the value of the music we create.”

            TRUTH/FACT – This is absolutely and unequivocally NOT TRUE. Only two PROs – ASCAP and BMI – are subject to Consent Decrees (discussed in a moment) where there is a rate-setting proceeding if they cannot agree. SESAC can charge whatever they want. SESA is under no Consent Decree or ANY OTHER active government regulation. Azoff’s GMR is under absolutely NO government regulation, either. Individual songwriters are under ABSOLUTELY NO REGULATION, at all. They can charge WHATEVER THEY WANT.

            The reason ASCAP and BMI are under “regulation” in the form of Consent Decrees and are obliged to offer their catalogs to anyone is that they AGREED to that, as part of a voluntary settlement. ASCAP and BMI agreed to that settlement when the Department of Justice sued them, and threatened to put them out of business for being so blatantly anti-competitive (behavior that continues, today, as the most recent rate court noted).

            Israelite – “Pandora will continue to claim that publicity garnered by being on its platform is payment enough. But that publicity only turns to revenue when it manifests itself in album sales, which are drastically in decline as streaming takes over as the music-listening medium of choice.”

            TRUTH/FACTPublicity “only turns to revenue if it manifests in album sales”?!?!?!?! I’m not sure what decade Israelite thinks he’s writing this in. It’s 2015, already…. Albums have been proven, beyond any doubt, to NOT be the format of choice for consumers. People DON’T want to be forced to buy albums.

            What is more, record sales – whether in the form of singles, on-demand streaming or albums are hardly the “only revenue” that a songwriter makes. Synchs, commercial tie-ins, folio and other sources of revenue are, and always have been, available to songwriters.

            Bottom line: Everybody wants more. Pandora, songwriters, music publishers. EVERYONE wants more. No surprise, there. But if there isn’t any more to give (Pandora only just barely turned a profit just last year, for the first time), then everyone is going to have to adjust their expectations and their ask.

            TRUTH/FACT – As part of the recent Copyright Office study on music licensing, Israelite and hius music publisher constituents were asked to agree – separate and apart from, and before, any rate-setting proceedings – to agree to what they think songwriters should get, as a portion of overall royalties paid by digital music services. Numbers like 25% to 33% of the total royalties paid (that is an 825% increase for songwriters – EIGHT HUNDRED AND TWENTY FIVE PERCENT better, according to Israelite!) for songwriters were offered, and flatly rejected, by music publishers.

            Why? Why isn’t a 500%+ increase “enough”?

          • Avatar
            FWIW

            I apologize for my error regarding the rate setting process for songwriter/publisher royalties for Pandora. I should have left it at the fact that they are statutory and therefore set at a single, transparent rate for every songwriter/publisher. I hope that my error about the rate setting process doesn’t obscure the greater point I was trying to make (and on which I’m certain). 🙂

          • Avatar
            Nashville

            Great stuff here. I have read through several comments on this post and love seeing others that can identify the chemical imbalance within this industry. I have a bit of inside information I felt obligated to share. Being from Nashville “Music City USA”, I have a unique insight on this subject. Not more insight, just unique.

            If you’ve ever visited Nashville, you know its quite a small town. In the main downtown district (Honkey Tonk Central) bars line the streets of Broadway, each blasting out their best taste of what Nashville is supposed to be. For those of you who have not had the opportunity to visit, I’m sure the show Nashville has painted a perfect picture as to who we are. I wouldn’t know. I couldn’t stand to be in the room longer than 5 minutes when my wife was watching it. (She’s not from Nashville, so she thinks it’s funny how it’s portrayed) Funny thing is, she doesn’t even like country “music”. In fact, as I know better than to use terms such as most or every, several people in the state actually despise this genre as much as the rest of us. Now I will admit, a first time visit of honkey tonking all night and shouting the lyrics to the songs that everyone who’s ever owned a radio knows while drinking the most expensive bud light known to man, other than in maybe Miami, can be a fascinating experience. Followed by one hell of a hangover. I’m 32 years old now and have been going to the honkey tonks since I was able to drive downtown. Easier back in the day yes, but also helps to be friends with the owners of the best bars! Adding to this experience, and the real reason for writing, I had the fantastic job of valeting. I did this through college, off college, back to college until completion and overall spent 9 years on the corner of Broadway and 5th ave. Directly across from the Bridgestone arena. Not only the largest venue Nashville has to offer artists (Boy do we miss Starwood) but also worked for a very particular restaurant, specifically known for its “celebrity” status. Over 9.5 years, I had the opportunity to meet/come face to face with a wide range of stars, athletes, politicians, idols, heroes, …you name it. From Peyton Manning to Dennis Rodman, Dave Mathews to Hall and Oates, Kid Rocks frequent visits and yes, unfortunately TS. Several other country artists as well as country “artists” frequented our restaurant. One of my personal favorites was meeting Shaun White, followed 5 minutes later by Tony Hawk. Not even a big skateboarding kinda guy but def had the ps games and can appreciate the level of person he is to his sport. Working for tips, we prided ourselves on being the top valet location in the city. Everyone that visited our restaurant got treated as if they were our top VIP customer. Of course, in the prime location we were in, spaces were limited and high paying customers were always taken care of parking wise. Car doesn’t move. Parked right in front for all to see with the easiest convenience for departure. Most people realize this gesture and reward a valet well for watching after their car instead of taking it to the garage. As an economics major and enthusiast, I particularly like polls including statistics that can help us to better categorize groups of people. So as far as tipping is concerned. Let me categorize a few types of people that I encountered on a regular basis and go ahead and clear up why I said “unfortunately” TS. As it stood 3 years ago, she fell into our lowest tipping % of customers that never acknowledged the service provided and barely give a thank you. Not that I blame her. I realize 3 years ago and even today, she is still young and has much to learn. College and/or a non 1%-er job can teach much much more about life. So I definitely appreciate people that get behind a belief and try to lead the pack, as she has done with spotify, but lets get real. As someone mentioned above, it’s 2015 and the era of streaming is in full stride. Personally, I love the sound of CDs more than any other source of music. Other than live of course. And from time to time, still listen to the vinyl out by a bonfire. But let me touch on the live aspect real quick. From an economics view, do you get more benefit out of listening to artists through your earbuds, or are you more like me who would prefer to hear someone live? I’m already taking up way more space than anyone wants to read on this thread and understand theres probably a better place for this, but it’s been on my mind and with the mention of nashville and music row and ts and even ole big green tractor guy, this article struck a nerve, and as I mentioned before…I felt obligated to share. I figured most of you are here for investing purposes and thought this might provide the least bit of insight. Beyond investing, I love music and love what Pandora has to offer. Combined with Rhapsody, my music library is an unstoppable force when on a car ride! Without posting stats everywhere, I encourage you to see what artists make on one tour alone. For simplicity, lets assume the “artists” that can sell out arenas, or even the Ryman within 32 seconds. Chances are, they probably make more than you on one tour alone, aside from the royalties from the numerous sources. *Another great point provided above. Definitely not here to talk about the artists. Most respect the blessing they were given to be in the select few, who get to live the life they live. Back to tipping and the article. The next group of tippers (sorting lowest to highest) and ABSOLUTELY the sole people I decided to write out about, were our most frequent customers and least adored….the infamous “Music Row”. Ah yes. The Labels. Known to have been f***** over artists since the beginning of time. The people behind this lawsuit and the people who should absolutely be fastening their huggies. I know the ones who are anti-P are fuming right now saying, listen to this guy…the labels, its actually BMI thats suing. (A nashville based company) I get it. I know what they do. They make sure that if you play their songs in our honkey tonks by God, its their gracious hearts that make sure you pay the artists a % for using the song to entertain your guests. And rightfully so. No quarrels whatsoever. Wonder how much of the share they get for collecting though? I can save them plenty of time. Just send a check to Lynyrd Skynyrd for 1 million plays of S.H.A per night. Which technically isn’t country, but we’ll let them slide since they’re on broadway. Nowadays it’s the same covers of all the horrible sounds that come from that neck of the woods. Not that all true country is bad or can be considered bad tippers. In fact, one of our best tippers and the more talented and nicest of the two, comes from an original and classic country music band. (B&D) On the same tipping level as the label crew, would include people such as Merrill lynch (who knew right), BMI, Dell, high school proms, local politicians…you know the people. No coincidence, the worst week of the year, dreaded by all that work in the industry downtown…is the CMA fest. Man I would love to see the figures that county artists make from this week alone. Not to mention touring, hosting talent shows, royalties, ….. Not to get back on the artists or anything, but here lies my beef with the industry and the article posted. This genre, more than any other genre, relies upon “songwriters” + labels to make them who they are. Nothing more. They are a dime a dozen. Don’t believe me? Walk into any bar in Nashville on practically any night of the week. Close your eyes. You’re at a live country show. The fat cats sit back and appoint the next star one after the other and collect collect collect. But about these “songwriters” and wanting more. I witnessed people over the years who claimed this as their sole profession who literally aspired to insert one sentence into a “hit” song, and they were compensated for the year. Or years if you think you could make 200K last. It’s quite a sad market actually. Everyone is out to write the next twist of twang mixed with bleach and more wristbands than a delivery floor in the hospital. These people try their absolute hardest to not tip. Their holier than that. Can drink all afternoon on a regular Wednesday and vacation 12 times a year, but can’t thank you for running after their car, downtown while its raining. And since TS falls below this crowd, it irks me to hear her standing up to make things right. I know she does wonders with her money and no one is obligated to tip a valet s***. It doesn’t change her tipping class status. Of the two levels of tippers mentioned above, I will say, they only make up for roughly 20% of our customers. Most local businessmen and families within Nashville are kind people and very gracious with their successes. Several stars, local and foreign, can be classified in our top tier of tippers. So before I give thanks to some of my personal favorite customers, let me close in saying. As someone mentioned above, instead of trying to sue Pandora and the likes for providing a product highly in demand, lets take a deeper dive at how the pie gets sliced. Perhaps we could flip the script and pay the songwriters the producer share and renegotiate the majority of the portion to the artists. All the while reducing the % P has to pay so they can continue to provide this valuable service. Not valuable you say? For the artists to statistically pinpoint opportunities for touring in specific regions and song preferences to ensure shows capable of fans adding them to their favorite shows ever attended list? I think most artists are seeing this value and contemplating what someone else had mentioned above, do they really need these guys? Thats an awful big piece of the pie that could be divided up if not. Or at minimum it could be rationed out to help better compensate the blood sweat and tears that goes into making great music, instead of the fat cats down on “music row”. Most true artists write their own music and can therefore collect on both payouts rightfully so. Any artist who stands up so passionate for his writers is doing what we would all expect them to do, trying to protect their livelihood. Without songwriters happy, they would have to create their own music. So this lawsuit is really a distraction from the cats. Let the artists who need the writers and solely depend on writers, fight for the scraps under the table. Let someone else pay them. After all, while attending private parties and seeing the lifestyles led by those on music row, its only natural for them expect the same payout that can support such a lifestyle. Most aren’t in the spotlight long enough to ever come off life support. The next star is appointed, and even the queen ts herself gets replaced. Hopefully doesn’t end up shaving her head and bouncing in and out of rehab. We all know what happened to the last “American Girl”.

            Titans, predators, Nashville locals, KOL, KR, SMcN, and especially Predator fans, + many more, thank you for your support along the way.

          • Avatar
            Pandora pays too much

            Great comment! Unfortunately, because of it, I will probably waste some more of my time visiting this echo-chamber of half-truths. The constant, misinformed opinion presented here as “fact:” is getting boring. Thanks for livening things up!

  2. Avatar
    Remi Swierczek

    Pandora CAN and SHOULD become a music store
    …or it will continue to vent away bigger & bigger chunk of music goodwill with no benefits to anyone including own STOCKHOLDERS!

    SPOTIFY, YOUTUBE or Pandora stupidity has to STOP!

    Mr. Grainge!
    YOU ARE THE MOST POWERFULL MAN in still shrinking music business, let’s wake up take a look at the battlefield and charge for $100B music industry by 2020. SIMPLE if not primitive TASK.

  3. Avatar
    Anonymous

    Last I checked 4% is more than terrestrial radio pays song writers. When compared to other industries 4% isn’t all that bad.

    • Avatar
      rex

      Exactly. The lowest hanging fruit for fair pay for Sound Recordings is with Terrestrial Radio.

  4. Avatar
    Sebastian Wolff

    […] the $2,700 in songwriter and publisher royalties earned from 43 million streams of Pharrell Williams’ “Happy.”

    How is it that this factually incorrect number is still being thrown around like common knowledge? Pandora pays performance royalties to SoundExchange which for Pharrell are still unclaimed (I just checked). The <$3000 number may come from the aggregate publishing royalties, not total royalties.

    Secondarily, or rather primarily, can someone point me to a single verifiable resource conclusively confirming that only 4% are paid out to songwriters for non-interactive streams?

    • Avatar
      Paul Resnikoff

      Please don’t tell me Aloe Blacc or Bette Midler haven’t claimed their SE recording royalties either…

        • Avatar
          Paul Resnikoff

          Are you sure about that? I searched for all of those artists in the SoundExchange database, and looks like they’re claiming their royalties.

          Check Pharrell Williams, Aloe Blacc, and Bette Midler here:

          I’m missing something?

    • Avatar
      Musician Who Underestands

      Again with the uneducated folks entirely willing to spout off on topics that they just don’t understand..

      So frustrating….

      Sebastian Wolff
      “[…] the $2,700 in songwriter and publisher royalties earned from 43 million streams of Pharrell Williams’ “Happy.””

      How is it that this factually incorrect number is still being thrown around like common knowledge? Pandora pays performance royalties to SoundExchange which for Pharrell are still unclaimed (I just checked). The <$3000 number may come from the aggregate publishing royalties, not total royalties.

      The $2,700 figure is for songwriter performance royalties, which are separate and apart from sound recording performance royalties.

      I’ll wait a minute, to let that sink in…

      Once again, the claim that Pharrell only got $2,700 for 43 million streams is ONLY talking about the A) songwriter and publisher royalties for the performance of THE SONG.

      Soundexchange DOES NOT collect ANY royalties for the performances of songs. They only collect for the – B) DIGITAL ONLY performances of sound recordings.

      TWO DIFFERENT royalties, paid for DIFFERENT rights, to DIFFERENT entities (and ONLY digital services have to pay them BOTH).

      Is that clear, YET?????

      Sebastian Wolff Secondarily, or rather primarily, can someone point me to a single verifiable resource conclusively confirming that only 4% are paid out to songwriters for non-interactive streams?

      No. There isn’t a single source for that number (other than Pandora, I guess). But it’s pretty simple math, to estimate it. You add up the blanket license payments that Pandora has to make to the 3 PROs – ASCAP BMI and SESAC – which license fees are based on a percentage of revenue, and you get a little over 4%, in total.

      ASCAP rate for Pandora = 1.85% of revenue (by comparison, terrestrial radio only pays 1.7% of revenue to ASCAP)
      BMI rate for Pandora = 1.75% of revenue (again, by comparison, terrestrial radio only pays 1.7% of revenue to BMI)
      SESAC rate for Pandora = unknown but educated estimates are a bit over .5% at present.

      • Avatar
        Anonymous

        Does anyone else look at this and think “why on earth is this so damn complicated?”

        If there’s a lot of confusion amongst professionals about how the system works (and it seems like there is), maybe it’s not a good system.

  5. Avatar
    Reality check

    FWIW is 100 percent right about Mr. Israelite’s agenda and ALL songwriters and independent publishers should know that the big three puns are using the trade industry group to engineer a land grab that will give them equivalent power to the majors, who demand equity, massive up-front lump payments, MFN status, and who split gobs of non-play related income among themselves and never share any of the above with creators. No new entrants; total control of the distro pipe with consolidated catalogs as the cudgel. That’s their game.

    One minor sticking point, though. FWIW says the CRB sets rates for musical works performances. Not the case. The southern district court of NY overseas the rates. CRB handles mechanicals, as well as the digital performance royalties for sound recordings.

    The Copyright Office recommended moving all compulsory ratesetting to CRB. That’s a good idea that would benefit all parties in that evidence is more easily and expertly considered by this panel.

    • Avatar
      Sarah

      I think a big part of the problem is ratesetting at all. This is a system that evolved in a different world, technology-wise. Whether or not ratesetting was necessary then, it’s unnecessary now. The copyright office’s proposal for simplifying the industry is a great step in the right direction.

      As for the publishers – that’s a pretty nasty game they’re playing, if you’re right (I think you probably are).

      Please forgive my ignorance on this subject but… what exactly do they do that can’t be mostly or entirely replaced by appropriate technology?

      I’m sure there are a number of things that require actual labor, but from what I’ve seen the bulk of what they do should be automated – and easily manageable by the artists (writers) themselves; if that’s true, it seems they have way more control and leverage than they should have.

    • Avatar
      Musician Who Understands

      Sarah – “I think a big part of the problem is ratesetting at all. This is a system that evolved in a different world, technology-wise. Whether or not ratesetting was necessary then, it’s unnecessary now.”

      We have heard this: “The Consent Decrees/Mechanical statute are form a different era. Technology makes these systems outdated” arguments, without ANY support, long enough.

      Please explain a) what was the “technological” issue that required rate-setting in the past, and b) what new “technology” makes rate-setting processes unnecessary, now.

      I asked Paul Williams the same thing, after he said that the ASCAP Consent Decree was not fit for the “digital world.” I asked him what was it about new digital uses that required a different licensing paradigm.

      He couldn’t answer.

      Sarah – “The copyright office’s proposal for simplifying the industry is a great step in the right direction.”

      If you understand the system, and the Copyright Office proposal, the Copyright Office proposal clearly does NOT represent a “simplification.” In fact, it overly complicates the licensing system.

      * It suggests creating 20 (or more) mechanical licensing entities, where there are now just a few – and it proposes to allow absolutely unlimited, individual publisher opt-outs of even THAT crowded system.
      * It proposes that an unlimited number of individual music publishers should be able to contract independently for “interactive new media” rights – where those rights are currently covered by a blanket system of only 3 PROs.
      * It suggests moving copyright registration out of the Copyright Office, into a third-party “GMRO” database, that needs to be built, maintained and constantly updated.
      *all of this and it STILL does NOT require copyright owners to identify themselves and STILL requires that aspiring licensees must go out and find any number of copyright owners, in order to properly license and avoid liability.

      These are just a few of the ways that the Copyright Office proposal is far from a “simplification” and is indeed, actually seeking increased complication of the present system. I love how the office labeled it a “simplification” and folks just bought that line, without ever reading the proposal, or actually thinking about it….

      Sarah – “As for the publishers…. Please forgive my ignorance on this subject but… what exactly do they do that can’t be mostly or entirely replaced by appropriate technology?

      I’m sure there are a number of things that require actual labor, but from what I’ve seen the bulk of what they do should be automated – and easily manageable by the artists (writers) themselves; if that’s true, it seems they have way more control and leverage than they should have.”

      The publishers themselves do very little, in terms of active work. Some do a bit of “plugging” to get songs their songwriters have written “placed” on recordings. But for the most part, they just “A&R” for talent that they want to sign and, once signed, the typical publisher does very little other than collect royalties.

      It is the aggregating agencies that do all of the work – HFA on the mechanicals side, and the PROs (ASCAP, BMI and SESAC) on performance side. These are the entities that actually handle bulk licensing of large catalogs to record labels, radio and music services, collecting and distributing royalties. Music publishers really just collect from HFA and the PROs.

      And BTW, it is THAT layer – the intermediary level, the aggregator licensing agency layer – that the Copyright Office proposal seeks to make much more complicated and crowded.

      • Avatar
        Sarah

        Thats a lot of italics. 🙂 Thanks for the detailed response. I’m only about a third of the way through the proposal, so I’ll take your comment to heart and refrain from discussing it until I’ve finished.

      • Avatar
        Musician Who Understands

        You can still answer the questions about why you think rate-setting is out-dated and no longer necessary.

        What do you think was the “technological” issue that required rate-setting in the past?

        What new “technology” makes rate-setting processes either out-dated or unnecessary, now?

        • Avatar
          Sarah

          I’m not sure there was ever a technological issue that required rate setting specifically. Here’s my take on the situation. You’re far more knowledgeable about the industry, so I’m going to stick to basics – if there are facts that contradict my understanding (or that are omitted), please share them; I participate in discussions like this to learn, not to tell the world that I’m right about everything. 🙂

          My understanding of this bit of history:
          In the early 1900s, composers weren’t getting paid for public performances of their music. ASCAP was founded by a composer to help fix that, which was awesome. ASCAP collected performance royalties on behalf of its members; eventually it got into radio licensing, specifically with blanket licenses. ASCAP became dominant, and (as one might expect) some of its customers (broadcasters) thought the blanket licenses were too expensive. Enter BMI, formed by broadcasters in order to provide a cheaper alternative to ASCAP.
          So then we’ve got two companies dominating music licensing. Government sees some antitrust issues, sues them, they agree on the consent decrees which include the rate setting provisions.

          So you’re right – there’s nothing about the rate-setting issues that’s changed, really.

          The rate-setting was a response to two dominant licensing companies that were suspected of anticompetitive behavior.

          The real question is “do you actually need ASCAP and BMI anymore?”

          When they were founded, I think it’s indisputable they were meeting real needs. Communication (and therefore acquisition of information, such as the address of a songwriter) was more difficult, what with mail and carrier pigeons and such. If you were a composer you couldn’t possibly keep tabs on who was using your work; if you were a broadcaster interested in licensing a song, it was super tedious and time consuming to actually track down the owner – it’d be prohibitive to do that for hundreds or thousands of songs.

          At the time those organizations were founded, and for much of the 1900s, they were legitimately needed. So writers’ participating in ASCAP/BMI and their blanket licenses, even though it meant giving up significant control over your own work, was a sensible solution.

          But now it can be relatively easy to keep tabs on who is using your work, and to license it yourself. It can be easy for people interested in licensing songs to contact the owners directly. Much of the licensing and royalties collection can be automated and easily managed by the writers themselves. Please note that I’m not saying there’s a system that does this well today – I’m saying only that current technology means it’s quite possible.

          It’s not that anything has changed the role of rate setting itself; what arguably has changed is the need for the organizations that necessitated rate setting in the first place. And that change is, yes, largely a technological one.

          And if that means that songwriters get more control over their work, I think that’s a really good thing.

        • Avatar
          Musician Who Understands

          Sarah – “I’m not sure there was ever a technological issue that required rate setting specifically.”

          Exactly. this is why people shouldn’t just read editorials or PR statements from ANYONE and take it as “truth” or an accurate framing of the issue. The publishers and PROs have been repeating this “it’s outdated” “it doesn’t keep up with the current technology” complaint about the rate-setting processes for a while now. The Copyright Office has even repeated it, as well – ALL with absolutely NO support for that contention.

          Sarah – “My understanding of this bit of history…. Government sees some antitrust issues, sues them, they agree on the consent decrees which include the rate setting provisions.

          Yes. The rate-setting mechanism for ASCAP and BMI is NOT the product of any technological failing. Not at all. The Consent Decrees and the rate-setting process they outline is ENTIRELY the product of the anti-competitive behavior that ASCAP and BMI exhibited.

          So, when they say things like “These Consent Decrees are over 40 years old” and “they were established before the internet” and other diversionary rhetoric, it means absolutely nothing. The Consent Decrees weren’t put in place to make licensing individual lacquer disks more efficient.

          They were put in place – specifically – to control the explicit anti-competitive actions of what is a very small oligarchy – a total of three entities that cover an entire market.

          Sarah – “So you’re right – there’s nothing about the rate-setting issues that’s changed, really.”

          So, since we know the reason for the Consent Decrees is to control anti-competitive practices, if we are going to ask: “Are the Consent Decrees and the rate-setting process they establish still necessary?” pretty much the ONLY thing we should be looking at is: “Is there still a monopoly or oligopoly in that market?” and “Are those monopolists still engaging in anti-competitive behaviors?”

          If the answer is no, to both of those questions, then perhaps the Consent Decrees and the rate-setting mandate can be relaxed or done away with. But we still have an oligopoly in that marketplace. Songwriters and music publishers still use only the three PROs (because it is easy, efficient and already in place). We apparently still have anti-competitive behavior, as well, unfortunately. The Judge in the most recent rate setting trial between Pandora and ASCAP noted it. She said that the evidence indicated a “disturbing level of coordination.” In fact, just lat year, the DOJ has launched an investigation of ASCAP, BMI AND SESAC, in light of recent facts that have come to light in various negotiations and rate-setting trials.

          It has nothing to do with “technology” or the Consent Decrees being “old.” It has everything to do with the three PROs (and what are now some very large music publishers – bigger than any single PRO, in fact) simply wanting to be able to do whatever they want and to exercise their monopoly power so that they can screw their songwriters harder and get more money out of the digital services, as well

          Sarah – “The real question is “do you actually need ASCAP and BMI anymore?”

          When they were founded, I think it’s indisputable they were meeting real needs. Communication (and therefore acquisition of information, such as the address of a songwriter) was more difficult, what with mail and carrier pigeons and such. If you were a composer you couldn’t possibly keep tabs on who was using your work; if you were a broadcaster interested in licensing a song, it was super tedious and time consuming to actually track down the owner – it’d be prohibitive to do that for hundreds or thousands of songs.

          But now it can be relatively easy to keep tabs on who is using your work, and to license it yourself. It can be easy for people interested in licensing songs to contact the owners directly. Much of the licensing and royalties collection can be automated and easily managed by the writers themselves. Please note that I’m not saying there’s a system that does this well today – I’m saying only that current technology means it’s quite possible.

          I think you’re making way too little of the administrative burdens associated with licensing songs.

          You really think it is possible for an individual songwriter to find every radio station, digital music service, television station, bar, restaurant, clothing store, etc. etc, that is playing their song and a) negotiate a license for the performance of their song(s) with each and every one of them, and THEN go on to b) make sure they are and remain properly licensed, c) paying on time and d) are properly reporting all their plays of that songwriter’s songs????

          On the other side of that, do you really think that every radio station, digital music service, television station, bar, restaurant, clothing store, etc. etc, wants to have to go out and find every one of the hundreds of millions of songwriters on the 30 million + songs out there, and negotiate with each one, for the right to perform their songs????

          That is just not feasible, for ANYONE involved. I am sure you will agree, if you think about it, for a minute. No advent of the digital age has changed that. Even in the “digital age,” until every songwriter agrees to put all of their licensing information into a complete and comprehensive, automated licensing database which is accessible to any music user, no amount of “technology” will make the task significantly easier.

          Blanket licenses through collectives like the PROs serve important purposes. They make licensing easy – indeed, even “do-able” at all – for EVERYONE involved.

          We need to be appreciative of the benefits those collectives provide, balanced with the drawbacks that can come with centralizing so much licensing power.

          • Avatar
            Sarah

            Great points, and I thank you for taking the time to make them. I agree with most of your response – in fact, I agree with everything in terms of the way things are right now; my point is more about the way things “should” be.

            MWU – “Even in the “digital age,” until every songwriter agrees to put all of their licensing information into a complete and comprehensive, automated licensing database which is accessible to any music user, no amount of “technology” will make the task significantly easier.”

            That’s exactly what should happen – except it wouldn’t require universal participation, just enough so that it becomes a standard business practice. You could even make it easy for writers to inform licensees that they’ve opted to not participate in the marketplace.

            It’s more than possible (thanks to technology) and there would be serious benefits.

            A centralized database/marketplace would be efficient, eliminate the monopoly issues, and give songwriters maximum control. It would also increase the possibility of more creative licensing arrangements (for instance, blanket licenses for specialized groups of songs; fixed fee for usage over a set period of time as an alternative to per play). The technology is pretty easy, honestly – there’s no reason why this sort of database/marketplace combo shouldn’t exist. Negotiating, licensing, tracking, payments, recordkeeping – that can be automated in a vast majority of cases.

            Moving the default from “PRO control” to “Songwriter control” means that songwriters have a lot more leverage, it’s easier for more competition to emerge, and the PROs would have to make sure they’re earning their keep for their typical songwriter (a centralized database/marketplace would not necessarily eliminate the role of PROs).

            In that case, if PROs do on average still provide real value to songwriters, they’ll continue doing just fine. But individual songwriters who don’t feel they benefit from the PROs enough to justify the costs of using them would have a viable alternative.

          • Avatar
            Musician Who Understands

            Sarah – “[every songwriter agrees to put all of their licensing information into a complete and comprehensive, automated licensing database which is accessible to any music user, no amount of “technology” will make the task significantly easier.]

            That’s exactly what should happen – except it wouldn’t require universal participation, just enough so that it becomes a standard business practice. You could even make it easy for writers to inform licensees that they’ve opted to not participate in the marketplace.

            Agreed that, ultimately, it wouldn’t require universal participation. I believe that there would eventually be near-universal participation anyway (to wit: generally, songwriters WANT their songs to be played) and for those that didn’t participate well, there would be any number of good reasons for that, I suppose. In a perfectly efficient marketplace, music services shouldn’t just have an unencumbered right to use any song they want.

            But there are a number of problems with aspiring to this system, some are absolute (i.e. that are just attendant to the system itself) and some are about how do we get “there,” from where we are now. These issues are not solved by technology.

            Regarding absolute problems, just some are:

            Who creates this database, who funds it, who maintains it and who can put data into it or change/update entries that are already present? Seriously, these are big issues that are quite sensitive – and no one agrees on the answers. What happens if the data in the database is incorrect or not current and some licensee relies on it? Can that licensee be sued for hundreds of thousands of dollars because the database had a glitch?

            Even if every songwriter (or the vast majority) agreed to participate, individually, that STILL leaves issues like, what uses, for what price that often would have to be worked out, individually anyway. For instance, you could have an artist who puts their song into the database. In the interests of efficient licensing, they go on to establish base-line terms for a license, to ease licensing, say: “My Song X is available to terrestrial radio for $0.005 per play, to non-interactive digital streaming for $0.00020 per stream and for interactive streaming for $05 per stream and for mechanical reproduction for $0.10 per copy. You can license it immediately, right here, by clicking the appropriate box, below.”

            Great. Now the radio stations, digital music services and record companies know exactly how much they have to pay for that song and even how to license it quickly and efficiently.

            But what happens when – as we know happens – some artists want to say “I’ll license here for non-interacitve streaming and mechanicals, but not interactive, on-demand streaming. If you want to do interactive, on-demand streaming, you need to see me and I want to know what your service looks like, before I will set a rate, or even agree.” That is entirely reasonable for the artist to say. But doing that undermines the whole purpose of the centralized, automated database. Now, those services have to see that artists, directly and individually, anyway.

            You can see what happens when thousands of artists start to piecemeal out what they will license and won’t license like that. It just makes it horribly inefficient and essentially guts all the benefits of collective “one-stop” licensing, that the database is intended to provide.

            What happens when certain artists don’t want to publicize their rates on this publicly accessible database (either because they don’t want anyone to know them, or they are embarrassed or whatever)? Again, we end up having to go to individual licensing – and the whole benefit of the central database has been undermined.

            What about those artists who’s songs aren’t really popular and they derive little or no benefit from having them up on the database? In may respects, these artists currently benefit from true blanket licensing, in that they get to kind of “draft in behind” the bigger, more popular artists in the same licensing catalog as them. These artists don’t like the idea of true individual licensing – and rightly so, from their perspective.

            As to how we get there from here, it is a real problem. Radio stations, digital music services and the public, in general, has become quite used to the present system that result in essentially all music being available. Any move towards an entirely voluntary system would undoubtedly have some serious impacts on the existing music industry, music services and the general public. Like, some big companies going entirely out of business serious. I’m not saying we have to protect everyone and keep every legacy business going, I’m just suggesting that there is a lot to think about here. There will be winners and losers – and how you transition will effectively determine who some of those winners and losers will be. Not easy.

            Sarah – “A centralized database/marketplace would be efficient, eliminate the monopoly issues, and give songwriters maximum control.”

            Not necessarily. All of that depends on how the database is created and maintained and who owns it/has the rights to it. It could very easily be VERY inefficient and present a significant monopoly. Ther’s lots to think about there and again, technology doesn’t solve it. It makes it possible to solve yes, but, it doesn’t solve many of the hardest issues (and never will).

            Sarah – “Negotiating, licensing, tracking, payments, recordkeeping – that can be automated in a vast majority of cases.

            You may want to think about that, again.

            Short of some HAL-level kind self-awareness, no technology is going to automate the negotiation process over one person’s use of another person’s creative work. Just not gonna happen. As I said above, rights-holders can pre-set agreed upon rates but, if it comes to something they want to negotiate (i.e. something that they want to evaluate and consider the appropriate approach to) – no database or machine can do that.

          • Avatar
            Sarah

            Again, excellent points. I like talking to you, Musician Who Understands 🙂

            I won’t address them all here at this time, because it’d take forever and honestly this sort of system is still some time away, if it ever happens. But there are a few key points I think are worth covering.

            MWU – “Who creates this database, who funds it, who maintains it and who can put data into it or change/update entries that are already present?”

            Well, any company who wants to build it and fund it. I assume it’d be run like any other business. Everyone who does this stuff currently gets paid somehow, right? What’s the difference between paying people and paying for participation in the marketplace and/or specific services?

            As far as the fact that “no one agrees on the answers” – I propose that’s actually a good thing, because it means that a system that operates like this has to be genuinely attractive to individual songwriters to get big enough to succeed. In other words, it won’t work if just a major label wants to participate. It requires, by design, the voluntary buy in of the actual people who will participate – the songwriters themselves – not corporations or organizations claiming to represent them.

            MWU – “that STILL leaves issues like, what uses, for what price that often would have to be worked out, individually anyway.”

            Yes, but that’s manageable. It’d require some work designing it up front, but this is not an insurmountable problem.

            MWU – “But what happens when – as we know happens – some artists want to say “I’ll license here for non-interacitve streaming and mechanicals, but not interactive, on-demand streaming. If you want to do interactive, on-demand streaming, you need to see me and I want to know what your service looks like, before I will set a rate, or even agree.”

            Trickier. It’s more work for the licensee but that’s okay in the grand scheme of things because – I’m going out on a limb here – if the songwriter wants to be picky about how/on what terms his work is used, that’s completely his right. It’s his work. Creative designs and processes can make this manageable.

            MWU – “You can see what happens when thousands of artists start to piecemeal out what they will license and won’t license like that. It just makes it horribly inefficient and essentially guts all the benefits of collective “one-stop” licensing, that the database is intended to provide.”

            Efficiency is not the only consideration. The songwriter’s control over his work is an important factor. If the most efficient system can only be achieved by denying songwriters significant control over their work, then I am of the opinion that maximum efficiency is not a good priority. Reasonable efficiency with maximum respect for songwriters’ rights and ownership is a better goal.

            MWU – “As to how we get there from here, it is a real problem.”

            Yep. It won’t come from the top. Here’s my take (and I acknowledge that I may be wrong): There are a LOT of middlemen in the music industry. Most, if not all of them, served valuable functions when they were started. But now it’s possible to replace at least some of those middlemen and/or their functions with tech-driven systems that are cheaper and put control back in the hands of the artists. It’s not up to me (or any one person) to decide which players in the industry still provide value significant to justify their costs – that’d get sorted out by the industry participants in time.

            If a system like this were implemented, it would require the buy in of individual artists. Those artists would, in time, find the right mix of what they can/want to do by themselves and what they would prefer or have to leave up to someone else. I don’t expect “middlemen” to go away, and they shouldn’t – some do provide real value; but we’re at a point where artists can (with the right system) take over some of the functions they serve and take back greater control over their work.

            Fundamentally, a system like this – if successful – would flip the industry upside down. Instead of the majority of power being in the hands of a relatively small number of major players, it’d be in the hands of the artists. Any remaining middlemen would be there because the artists themselves believe they provide valuable services. And, again, I’m all for that.

            MWU – “It could very easily be VERY inefficient and present a significant monopoly.”

            It’d probably be a monopoly, if successful. But that’s not necessarily a bad thing (it also wouldn’t necessarily put artists in a worse position than they’re in now). Plus, the tech side of this is pretty easy and relatively low cost – so significant abuse of a monopoly position would invite competition with more attractive terms real fast. Not a perfect solution, but I don’t think “perfect” is possible in marketplaces.

            MWU – “As I said above, rights-holders can pre-set agreed upon rates but, if it comes to something they want to negotiate (i.e. something that they want to evaluate and consider the appropriate approach to) – no database or machine can do that.”

            Okay, so the negotiating won’t be completely automated. But it can be made really, really easy and quick. Obviously if an artist decides he wants to put significant consideration into a deal or take his time evaluating it, that will hold things up – but that’s his right, if the licensee doesn’t like it then he doesn’t have to use the artist’s work. When else is it acceptable to say to a business, “You’re being too difficult in negotiating, so I’m just going to have someone else tell you what you’ll sell your work to me for”?

            In conclusion… there are indeed a billion issues to consider, and some that would require significant thought and creativity to reach acceptable solutions, but none that are insurmountable. It wouldn’t be a perfect system, but I think it would be a substantially improved system.

  6. Avatar
    GGG

    Paul, hire this “Musician Who Understands” guy to write your articles.

    • Avatar
      Pandora pays too much

      +100.

      Musician that Understands-where have you been? Thanks goodness you are here. I hope you like Washington, D.C., the industry needs an educated advocate.

  7. Avatar
    John

    The profit margin of chain retail stores is around 4%.

    Streaming music is easily on this massive of scale. So where’s the beef?

    • Avatar
      Sarah

      4% profit margin alone doesn’t actually tell you that much.

      4% could mean that you get $1,000.00 or $0.00001 in profit, for example. It’s not as simple as “you have the same profit margins, so what’s the big deal?” There are plenty of other factors to consider.

      Also, comparing across industries usually doesn’t usually yield much meaningful information.

    • Avatar
      Musician Who Understands

      Folks, PLEEEEAAAAAAASE:

      The rate that music services pay is NOT pegged to “profit.” The PRO’s would rightly never agree to that, for the example that Sarah noted.

      The rate is a percentage of “revenue.”

      Not “profit.”

  8. Avatar
    Adrian

    There is a very simple solution to this. If an artist doesn’t like the amount Pandora pays he/she can simply send them a note and request their music be removed. Pandora will be happy to do that. They fully understand that some artists do not need or want exposure to new fans. These artists can also request other radio stations remove their music as well. It’s a shame though. The problem isn’t with Pandora or other RADIO STATIONS, it is with the on-demand services such as Spotify, a very different kind of service than Pandora. Sadly few artists understand the differences though so my advice is just remove your music from all, that way you won’t have to whine over royalty rates.

    As for the writers I also have a suggestion as to how you can make a lot more money with your songs. Rather than just write a song and then wait to collect your royalties from other people’s work, why don’t you invest in the production of your work? Put up your money to pay the musicians, technicians, studios, marketing people etc. and then take a much larger percentage as an investor. What a novel idea!

  9. Avatar
    out of the blue

    My take from reading this — going through that one amazing wall of text to find that his payload is to accuse Taylor Swift of being a lousy tipper — is that nearly all the comments tend to argue for paying artists and song writers LESS. It’s the same old system of the poor competing in a race to the bottom for creating, while the rich skim whatever profits there are sheerly for having
    the mechanical “means” to broadcast them.

    Let’s start with that Pandora doesn’t have any other product, so whatever income it gets is ALL due to others. And go from there on distributing revenue. As at least one says up above, if whoever is funding Pandora is upset with low rate of return, then THEY can go into some other line, not try to fleece those who provide the productsl. Look at who produces and empower them. Pandora’s “investors” are a) wanting too much return; b) not due much for not much effort.

    As for other points about this TOO being a power grab by various other actors wanting to live of artists, YES, almost certainly. Same principle applies: focus on who produces and who’s a parasite. Yes, we live in complex society and benefit from cooperation, but problem is that the parasites always grab and grab until they destroy the host. I basically regard Pandora as just a new form of parasite. — How is it better if new parasites just take over from the old “dinosaurs” in the same system? That’s the wrong kind of re-distribution. Those who work and create just get new masters…

    • Avatar
      Name2

      but problem is that the parasites always grab and grab until they destroy the host.

      It’s an antecedent problem. One could say the publishers and copyright owners are the parasites:
      – making a big push for new Federal rights and ever-higher prices, making the streaming sphere (and radio?) completely unworkable.

      Furthermore, no publisher or label is putting together a product – the software, the infrastructure, the support, the mobility, the software development, the accounting, the unique social and organizational features – that the various streaming companies are largely trying to compete on.

      And as a wider and wider assortment of entities start being visible in the marketplace and making “money” – yeah, checks gonna be smaller, but there’s gonna be more of them, for more people. Even people who aren’t Taylor Swift.