Pandora hits $1.5 billion mark in royalties paid

Internet radio company Pandora this week announced it hit a milestone: it has now paid US$1.5 billion to rights holders and creators since it began ten years ago.

Operating only in Australia, New Zealand and the US, last year it paid out $500 million. To put that in perspective, all US subscription services paid out $540 million in total to labels in the 12-month period ending in June 30, according to the RIAA.

Jane Huxley, Managing Director, Australia & New Zealand, told TMN the growth in royalties is linked directly to Pandora’s growth in revenue.

“Royalties grow in proportion to the growth of revenue at Pandora. We have made more than $1 billion in sales in the last 12 months andthis revenue growth is attributed to Pandora having the right platform at the right time.

"Two of the fastest growing segments in digital advertising are mobile and data driven executions. The vast majority of Pandora users are listening on a mobile device, and all of our users are logged in, so we are able to directly meet the needs of those advertisers.

"Terrestrial radio buyers who are looking for a strong and accountable return are now moving money directly to Pandora to target their consumers using a combination of audio and display assets.All of this means that Pandora is monetising in this space better than almost any platform, and the royalties we are returning to the market are increasing sequentially."

“I am proud of our enormous royalty contributions, and our progress on building on a broader vision for the future of music,” Pandora CEO Brian McAndrews said in a statement. “We are very passionate about our mission to help artists find their audience and help listeners find their music — music they love, that moves them, that they personally connect with — and we are achieving significant momentum.

“It took us nearly nine years to generate the first billion dollars in royalties, and just over a year to increase that total by 50%. We are partnering with music makers to fully tap into Pandora’s people, data and technology to unleash the music industry’s full potential. I am proud of our enormous royalty contributions, and our progress on building on a broader vision for the future of music.”

Launched in 2000, Pandora is an important player in online music services. Last year it had 81.4 million listeners – 75% of whom access it through their mobile phones. It had 250 million registered users, 175 million from the United States. American users are on the service an average of 22.3 hours per month or 25 minutes per day. Pandora has 1 million tracks from 100,000 artists, 44% of which are indie acts.

But the company continually faces criticisms from the music industry that its royalty rates are too low. Most of its users use the free ad-supported tier, and it pays a performer $0.0014 each time a listener hears that recording. That rate is set by the US Government-appointed Copyright Royalty Board.

This year, digital collective management organisation SoundExchange has proposed that Pandora should start paying $0.0025 per performance in 2016, with a $0.0001 increase every year thereafter until 2020. This issue is set to be sorted out by December 16.

But this would increase its content acquisition costs, which are already high at about 48% of revenues. Earlier this month, Pandora stated that the Copyright office has agreed to consider its deal with Merlin, a global rights agency which represents 200,000 labels, as a valid benchmark for royalties in the case. Its stock price jumped up 15% as a result.

In comparison, Spotify negotiates its royalty rate directly with labels. In June 2015, it claimed it paid out $3 billion in royalties since coming on in 2008, however its believed its losses were far greater than Pandora’s.