At Canadian Music Week this past Friday, I attended the ‘Questions with Mike Huppe (SoundExchange President and CEO)’ conversation.
After a 20 minute humble brag about how SoundExchange has seen double-digit growth every year for the past decade, and that SoundExchange paid out $890 million last year to artists and labels, I raised my hand and asked a question.
I first explained that artists who had great success on Pandora were coming to me asking why their SoundExchange money was rapidly disappearing over the course of the past few months (while their Pandora plays were growing). I asked him why and where all that money was now going.
Before I get to his reply, let’s step back and let me explain what all of this is and means.
SoundExchange was started 14 years ago as a non-profit (appointed by the US Government) to issue sound-recording performance licenses and collect sound-recording performance royalties from “non-interactive” (you can’t choose the song) digital radio services — like Pandora and SiriusXM. To clarify, these are sound-recording performance royalties for artists and labels (not composition performance royalties, which is what ASCAP, BMI, SESAC collect for songwriters and publishers).
Up until very recently, all the money that Pandora paid out for the sound recording royalties went directly to SoundExchange. SoundExchange then paid 50% of that money to labels and 50% of that money to artists.
For clarity, these sound recording royalties paid out to SoundExchange were drastically higher than the composition royalties paid out to ASCAP, BMI and SESAC (some have put that number at around 10-14x higher). It’s extremely complicated why this is and has a lot to do with consent decrees established by the US Government about 100 years ago for ASCAP and BMI. But that’s neither here nor there.
I say ‘were,’ because shit just changed. A lot.
Mike explained that because of Pandora’s new “interactive” (you can choose the song) service, Pandora is no longer paying SoundExchange all of the sound recording royalties, but rather the “labels” directly.
He directed me to a Medium blog post by Pandora’s new Music Analytics and Insights analyst Glenn Peoples.
Glenn breaks it down further in his piece explaining that Pandora now has direct licensing agreements with labels and distributors and is only paying SoundExchange the artist’s share (50%) of the ad-supported radio tier.
Pandora now has 3 tiers: the ad-supported radio service (tier 1), the subscription radio (tier 2) called Pandora Plus, and (tier 3) the new interactive subscription service called Pandora Premium.
Pandora is paying the labels directly for the subscription top 2 tiers AND the label share of tier 1, the ad-supported radio service.
Every DIY artist who signed up with SoundExchange and selected the “Both” option indicating that they are the artist AND the label have now seen their label royalties drop drastically.
One artist I spoke with who has millions of plays on Pandora has seen his Rights Owner Pandora revenue drop 92% since December.
Where is this money going? Well, he used CD Baby to distribute his music to the other stores like iTunes, Spotify, Amazon, Tidal, etc. So CD Baby is his distributor for some of his music. When he inquired with SoundExchange about where his label money is they told him to talk to CD Baby. When he spoke with CD Baby, they seemed to still be trying to figure out where all the money is.
Jon Bahr who is the VP of music publishing at CD Baby explained:
“As we transitioned to the new [Pandora] structure, we performed a data integrity exercise rooted in UPCs and ISRCs. There was a slight delay to complete this exercise for the first payment of this new partnership that we issued in February covering all of Q4-16. It was resolved quickly and payments have been going out monthly thereafter, which is now current through February. CD Baby clients with personal questions about their Pandora payment should contact our customer service, who is well versed on this partnership and how payments work between us and Pandora. Specific per-stream rates, though, are confidential as Glenn noted in his article. As he also noted, they are not lower than artists would have been receiving prior to participating in a direct license.”
— Jon Bahr, VP Music Publishing, CD Baby
But the problem is, CD Baby (or any DIY distributor like DistroKid, Tunecore, Symphonic, OneRPM, Ditto, Horus, RouteNote, MondoTunes, ReverbNation, or any of the others) did not initially distribute the release to Pandora. So how does Pandora know which “label” to pay for these DIY artists?
DIY artists had to go directly to Pandora previously via their submission process. If approved, Pandora reported the royalties to SoundExchange and SoundExchange paid out the money to the DIY artists who signed up and let SoundExchange know they were the artists and the “Rights Owners.”
But now, much of this money seems to be held up in purgatory. Pandora may be paying the DIY distributors or they may just be reallocating the money to the major labels because they don’t know who to pay. And the majors are a helluva lot scarier than sweet little DIY distributors. And you can guarantee the major labels will not return the money stating “oh you made a mistake, Pandora, you overpaid us!” Ha.
That being said, I spoke to a few DIY distributors who said that when they receive big checks from Pandora for songs they do not represent, they are, in fact, sending the money back to Pandora.
So who is getting paid the money owed to the DIY artists with music on Pandora? Because SoundExchange definitely is not any more (for the “label” share).
“Because of the confidentiality of the licensing agreements, the per-stream rates are not being made public. But artists and labels can rest assured they are receiving a better rate; record labels traded the new replay function — a non-statutory feature — for a more favorable payout”
– Glenn Peoples, Pandora
Glenn keeps referencing “labels,” but I want to know about the tens of thousands of DIY artists on Pandora who do not have labels that negotiated these “better rates”. Ok, so the rate is “better”. Cool. But you can’t say what it is because of confidentiality agreements. And no DIY distributor will reveal this rate (even my distributor) because of Pandora’s confidentiality agreements.
Well, Glenn, I’m a DIY artist without a label who has 77 songs on Pandora. Can I know what my per stream rate is please? I’m my own label. I’ve used 4 different distributors for these songs, but I submitted my music directly to Pandora. But now my (and thousands of other DIYers) money is being paid out to… whom?
Why don’t you address the thousands of DIYers who have music on Pandora?
We are the ones who need this money the most. Not the major labels. Why are you ignoring us? I understand that when you wrote for Billboard discussing DIY artist issues was very uncool. It ain’t sexy like how many records Adele has sold, but it’s a new industry and we matter, aight?
Do I really need to explain to you that the DIY music community is a massive force generating massive revenue? DIYer, Chance the Rapper, has more streams than the majority of major label artists. Literally hundreds more DIYers are generating millions of plays. Please pay attention. Please explain, exactly, where our money is going. And how to get it. Thanks.
This all being said, I don’t hate Pandora. I actually dig them quite a bit.
This isn’t meant to eviscerate them or claim they are a “bad” organization. They were one of the first streaming services to allow artists to see their backend analytics via AMP and include concert and ticket information (thanks!). I have applauded Pandora on many fronts, but when they misstep I need to call them out.
Pandora royally botched this rollout.
They could have easily given artists a heads up — via AMP, via press releases, via every DIY distributor — and told the artists to let Pandora know who their distributor is. Instead, they forced NDAs upon every DIY distributor. So they’re terrified to even mention this hiccup to their artists for fear of being banned from the service.
Pandora can make this right. They should post a public, master list of all the “unclaimed” songs with a search feature so artists can see if Pandora has the correct information.
This is similar to what SoundExchange had with their Plays database (where I first discovered that a company called “101 Distribution” was illegally claiming and receiving payment for the “Rights Owner” share of all of my songs — and literally thousands of other artists). A brilliant scam of scams.
So, Pandora, please shed some light on this so you don’t keep paying the wrong distributors. Don’t brush over this as “we’re paying labels”. Because thousands of DIY artists do not have “labels”. We have distributors and none of us used distributors to send Pandora music initially.
The ball is in your court Pandora.
Pandora did not return repeated requests for a comment in time for this story. They did, however, issue a statement an hour after this went live:
“By way of background, if DIY artists have opted-in through their distributor (we have deals with the ones you mentioned, specifically), their payments will be handled by that distributor. If a DIY artist does not have a relationship with those distributors, 100% of their payments go through SoundExchange”.
For clarity on this Pandora non-statement, every DIY artist has a relationship with a distributor because the only way to get music onto Pandora is if the song was publicly for sale on iTunes or Amazon (and the only way to get it there is via a distributor). There may be some very small distributors who have not yet struck deals with Pandora, but the vast majority of them have already (like all the ones I referenced above).
I’m not sure Pandora can simply sign a group of confidential deals that then result in potentially millions of non-payments. Pandora could be subjecting themselves to serious class action litigation here.
I do think Pandora is up to something nefarious here and trying to reduce royalty costs through circumvention of standard subscription rates applied on that 2nd tier. It has been their war cry for too many years to think they are not looking for an angle. Now they are trying something tricky in tandem with the labels. BTW – AMP was created years after it could have and should have been created – that dashboard toolset was a need for the rights community from the outset. Ari you are being too nice and forgiving…
great article – thanks for shedding light on this “new” issue.
Why are you stealing from musicians who are making you money?? Pay what you owe them, or I am deleting Pandora.
As usual a boat load of crap from Pandora. As a CD Baby artist, I decide if they collect my SoundExchange money or not. I chose not because I already had a SoundExchange account so why should I give CD Baby a piece of that money when I was already going direct. It is very simple for them to see that CD Baby does not collect my SoundExchange money and therefore they should be paying me direct. CD Baby’s big mistake – and I’ve literally gone as far up the ladder to complain about this as possible – is to automatically “opt in” artists to any new partnerships without asking. They send us several emails a week as it is, they can’t set up a simple “here’s a new partner we are distributing to, do you want to be in or out?” check box in our dashboards? Horse crap! As an administrator you can’t be one size fits all. Fix it!
‘long frustrated exhale sound’….enough already. It frustrates me to damn near the point of violence that these music business entities do not or cannot seem to play fair. We as musicians, independent labels, and, if I’m not not being too naive, fans of music – have to take control for once in our lives. Music is still basically an unregulated business system, as we are learning here, again.
The bulk of the streaming services, though they would claim to represent the future of the music biz, are actually very much beholden to the 20th century music biz. The only futuristic aspects they’ve implemented are streamlined processes of taking money from music lovers on a more consistent basis via monthly service fees – the front end. Then siphoning off the various royalties due to artists via a process so convoluted, they apparently don’t understand themselves . The back end.
In the middle of all this is a precious bit of magic that you, the artist, made called music. If you aren’t obviously sampling someone else’s work, or clearly copping their songs basic structure, the creation and payment for the creation of music could be a fairly simple exchange.
We are living in the age where all these things we do creatively have been ideologically reduced to “content” . All of us are now
“content providers”. So with that said, let’s take back the content.
I’m prepared to rant for your work as much as mine. And if they don’t want to pay you anyway, what’s the point of having it sitting in the metaphorical shop window?
Please check out some of the platforms looking to change things, like Resonate.is , cashmusic.org , and email me at [email protected] to vent and share ideas. 🙂 And thanks Digital Music News for shining a light on this!!
Here is my surprised face ?. Pandora has been flailing around in licensing waters for years trying to get their unsustainable business model to be everyone else’s problem (mostly content creators). This is the company that sued for years in federal courts to try to reduce the amount of royalties paid to creators to terrestrial radio levels. When they claim a “better deal” I am very skeptical.
Ari, great article. I just wanted to mention that Pandora did have a way to submit music to them directly via submit.pandora.com where indies could submit music even without a distributor. I think I used this option for all my CD BABY releases (and opted out of CD BABY distributing my music to Pandora ONLY) so that I could personally claim both the “artist” and “label” royalties without CD BABY taking 9% of my label share. (SN: my newer releases are with Tunecore so I get 100% of those royalties and I do submit to Pandora through that distributor since they don’t take a %).
As far the payments, things have definitely changed, for the worse, ?. Salute to the indies!!! Thanx for calling them out. Dear Pandora … I AM A LABEL TOO!
Ari, great article. I just wanted to mention that Pandora does have a way to submit music ot them directly via submit.pandora.com (where indies could use this option to submit music even without a distributor). I used this option for all my CD Baby-distributed releases (and opted-out of CD BABY distributing my music to Pandora) so that I could personally claim both the “artist” and “label” royalties without CD Baby taking 9% of my label share just to turn around and hand it over to me.
SN: my newer releases are with Tunecore so I get 100% of those royalties and I do submit to Pandora through that distributor since they don’t take a %.
As far as the payments, things have definitely changed, for the worse. Salute to the indies!!! Thanx for calling them out. Dear Pandora … I AM A LABEL TOO! | TamaraBubble.com
I pay for commercial free radio and just started getting commercials. Why?
Thank you for posting this.
I am an artist deeply affected by the change, have probably lost $300/month because of it.
I contacted Pandora’s customer service, did my own rate homework using data from soundexchange royalty statements and CD Baby statements and excel, and got into it with “Jamie” from Pandora’s team. He eventually ran out of answers. I think the believe musicians are incapable of calculating royalty rates given payment and stream data. Here is my email exchange with “Jamie.” Perhaps you will find it interesting. I’d be happy to share my excel worksheets with you as well, if you want to get into this deeper.
What follows is a back-and-forth, so it may be difficult to distinguish who’s talking without the indentations, but what can i do here? anyway::;
Hi Jamie – Thank you again for your thorough responses. They have prompted me to do some work with my royalty statements and excel this evening, and I have discovered some discrepancies between my understanding of your answers and what I’ve found to be the case. I hope you won’t mind clarifying once again, and thank you in advance for your time spent on this.
I’m going to interject in the thread below.. thanks!
Because even the artist share of royalties I’m being paid through SoundExchange has dropped down to about 20% of what it was, I still have questions:
1. What has happened with the artists like myself who have been part of the Pandora system for many years, who -unlike myself- did manage to opt out of the recent cdbaby “delivery” to you? Is their music available in your plus and premium tiers? If not, do you have a plan to bring them in somehow?
In order to have music available on our Plus and Premium tiers, it must be delivered by a licensed deal partner. There is no individual submission for this. I encourage you to explore options outside of CD Baby. I do know of services that charge a yearly fee, instead of take a % of revenue. These include Tunecore, Distrokid, and others.
I am a pandora one subscriber – which I believe is now Pandora Plus – correct?
I just played -using the iPhone app for my subscription- a song from my album “Introspective” which I submitted directly to you and is not available through CD baby. Was this an “ad supported stream” as you describe? Or was it a “subscription” stream? If it was a “subscription stream,” and if you pay all such streams to CD Baby – but CD Baby does not have this track in its catalog – where would I see the royalty income from this stream?
2. Is the rights holder share royalty that comes to me through cdbaby paid by you directly to cdbaby, or is it paid through SoundExchange to CD baby?
It is paid to CD Baby directly.
3. Is The rights holder share of royalties which cdbaby collects being paid at the statutory rate per stream, or at a different rate? What was the previous rate paid to me through SoundExchange, and what is the rate now? Unfortunately, I’m not at liberty to tell you the rates that we agreed to with CD Baby unless CD Baby authorizes me to. I can only say that it is not less than what you’d previously received from SX. You can see what that rate was here: https://www.loc.gov/crb/ (scroll to “December 16, 2015”).
ok – well I looked into this by consolidating all my soundexchange royalty statements for this year, and a few from previous years, and calculating and comparing the rates. CD baby is very transparent about the rates, but they are not at all clear about why which streams pay different rates.
I tracked my best-performing song “Camino De La Luna” and I find that my SoundExchange Rights Holder royalty rates paid out Jan-Feb for the months of October and November 2016 have rates of $.00109418 for Subscription plays, and $.0008455 for non-subscription plays. Meanwhile CD Baby is paying $.0007735 for what looks like non-subscription plays – NOT as good as before – and a combination of 3 tiers of rates for the rest – what I imagine correspond to your 3 subscription tiers? or do you have only 2? In any case, yes, these subscription rates are better $.0018, $.0019, $.0024, but the non-subscription rate is not better than before
What’s more troubling to me looking at this, is that my plays seem to be drying up – I can imagine why this would happen in an interactive environment where I’m less known – but why should this happen in the non-subscription “radio” environment? My song was averaging 50,000-100,000 plays a month before – now it seems to have jumped in January down to 4,500 non-subscription plays – and less than 2,000 subscription plays (down from 50,000ish). Did the CD Baby “delivery” affect the way my track was tagged or interacts in your system? It seems like a huge drop. Do you have that many fewer users of your non-subscription services all of a sudden.. 10x fewer? it sure feels scary to think I’m out 90% of this income from now on.
4. Has the cdbaby intrusion affected the rate per stream that I am being paid for the artists share? If so, and if I opt out now from the cdbaby problem, will that rate return to what it was? As stated in #3 above, the rate we’re paying to deal partners for ad-supported spins is not less than what would otherwise be paid if you did not send your music via CD Baby. For spins on Pandora Plus and Pandora Premium, it is significantly higher. But again, you must get those numbers directly from CD Baby. IF you opt out, you will not generate spins on either Plus or Premium.
Well this doesn’t seem right at all – or maybe you missed my question – and this is another worrisome point – I’m asking about my Artist Share royalties for non-subscription (ad-supported) spins – which you say you still pay me through SoundExchange – I have done the math (I’ll attach my spreadsheets to back everything I’m saying here) – and while the non-subscription rate in January and Feburary was $.00068848 – now it is down to $.000360594. nearly 1/2! Also – it looks different on my Artist Share SoundExchange statement – the Licensee says “Pandora – Cd Baby” and it is called “Direct Licensing” instead of “PANDORA.COM – nonsubscription webcast.”
Why the huge difference?
5. Going forward into the future, is there a plan to allow independent artists like myself submit music to all of Pandoras tiers?
The law requires that we have interactive rights to content if we’re playing it on our subscription services, so we must receive that content from licensed deal partners. We currently do not have a plan to enable interactive rights through our indie submissions page, but it is being talked about. The best path forward for an independent artist like yourself is to use a service such as Tunecore, Distrokid, etc..
Again – I’m confused as to how I was able to stream my non-CDBaby track using my Pandora Plus iphone app. Are you going to remove this? Where do I look for royalties? Can I get out of CD Baby with my more successful tracks (which have been with you for years) and get them back to where they were – like this one seems to be?
6. Could you please give me a breakdown of the various rates you pay per stream of each of your tiers of service?
I cannot. These are rates that are agreed to between Pandora and our deal partners, and I’m not able to divulge those terms. I can tell you that all deal partners receive the same rates. I encourage you to reach out to CD Baby about this.
This really sucks. Pandora just gave you a big runaround.
Daniel, thanks so much for sharing your letter. I have all these same questions. It’s so hard to track what’s happening when no one will give us any info. I really think we, as artists, and or rights owners have grounds for a class action law suit. As I read more and more articles, I’m finding so many people with the same problem. They distributed their own music to Pandora (without CDBaby) and were happily collecting through Sound Exchange. Then they start noticing their royalties have diminished greatly on Sound Exchange. Is is Sound Exchange’s fault? Is it Pandora’s fault? Is it CDBaby’s fault? The puzzle is too great to figure out why. You contact each one of these companies but no one has answers. Neither CDBaby nor Pandora ever gave us a heads up. Or told us what the new rules were. Argh! I hope for better days ahead with royalty fairness and ease of collection.
What I posted here back in April still applies (see above). What a bunch of horse shit.
What’s the state of this situation these days? Just experienced a month where Pandora stopped payment to Sound EX.