Pandora Moves to Direct Deal with Labels, SoundExchange’s Payouts Plunge 26.2%

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Out goes the compulsory license for Pandora; down goes SoundExchange’s royalty payouts.

Online streaming giant Pandora recently shifted from a compulsory license to a direct license with record labels.  The result was a giant slap to SoundExchange’s revenue and distributions.

According to SoundExchange, distributions dropped $225 million last year to $652 million.  That is a stark 26.2% plunge.

SoundExchange is a digital performance royalty society that collects and distributes digital royalties from satellite, webcasting, and webcasting services.

+ April 25th, 2017: Pandora Has Stopped Paying Artists Over 50% of Their Money

This move provides Pandora the ability to pay 50 major and independent label partners directly.  However, Pandora says they’re still paying SoundExchange for artist royalties — but only the artist’s share (50%) of its ad-supported radio tier.

All premium tiers, which are Pandora’s fastest-growing segment, involve direct payments to labels.  Unsurprisingly, artists themselves have been reporting precipitous royalty plunges since last year.

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.  Artists are only being paid through SoundExchange on tier 1.

Sounds like a familiar story: labels get more cash, and less goes back to the artist.  But what makes this story even worse is that neither Pandora nor SoundExchange offered artists any warning.  Or, clarity once payouts started plunging.  Instead, artists started freaking out, frantically calling Pandora and/or SoundExchange and only getting vague answers.

+ October 9th, 2017: ‘HELP: My Pandora Payments Are Plummeting and I Don’t Know Why

Sadly, this could have gone differently.  “Pandora royally botched this rollout,” DMN writer Ari Herstand wrote last year. “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.”

Similarly, Huppe was largely evasive when asked about the sharp downturns by DMN last year.  Those sharp reductions were of course pressing for Pandora artists, who were largely left in the dark.

Last year, SoundExchange announced that its revenues surpassed $5 billion. Michael Huppe,  SoundExchange’s CEO, heralded the “important moment for the new music economy.”  Huppe added, “It’s a milestone for the digital music services and, of course, for the artists and rights owners, who create the music that makes those services possible.”

Huppe is paid more than $1 million annually, according to the most recent SoundExchange tax filings.





5 Responses

  1. Benny

    really sad. soundexchange should be handling ALL payments from digital retailers to artists. that way, it would be more fair. now, all this money will go to recouping artists’ debt owed to labels. fuck!!!!!!!!!!

    • They Can't

      Pandora’s premium services are not fully noninteractive. As far as I know, SoundExchange can only collect statutory royalties. Even if they wanted to, interactive services couldn’t work through SoundExchange.

      For statutory rates to apply, Pandora cannot allow songs from any given artist to be played more than X times on a person’s stream in a 4 hour window. Statutory rates also restrict the number of skips a listener can do. The logic is that these abilities are components of interactive services.

  2. dp

    I heard that Paul Resnikoff the founder of this site once applied to work at SoundExchange but bombed the interview and didn’t get hired, is that true?

    I’m not sure how else to explain this site’s frequent petty dishonest attacks on the non-profit.

    The twisted logic here is utterly amazing: SoundExchange is doomed because Pandora is going direct and cutting them out, yet they’re also somehow culpable in Pandora’s unilateral decision to begin only paying the free tier artist royalties through SoundExchange? Or I guess the accusation is that SoundExchange nefariously kept the widely reported fact of Pandora’s direct deals a secret???

    come on guys, you can do better than this.

    • Anonymous

      I thought the article was critical of Pandora, rather than SoundExchange. Maybe I read it wrong…

    • Sum guy

      I heard it was because SoundExchange refused to advertise on Paul’s site. It’s pretty obvious he hates them. I’d wish he’d say why. Their CEO is paid over a million a year. Whose CEO isn’t?