Pandora US wants new royalty structure
Pandora is arguing to lower the music licensing rates it pays to artists, publishers and record labels in the United States.
In a document submitted to the US Copyright Royalty Board (CRB), the internet radio service says its statutory rate per stream in the US should be lowered from $0.00130 to a rate within the range of $0.00110 to $0.00129 for the 2016-2020 statutory royalty period.
Perhaps most importantly though, the documents obtained by radio and internet news website RAIN reveal Pandora’s previously private licensing deal with global record label association Merlin Network, which is allegedly the first of its kind in the industry. The arrangement, which was signed in August, reveals Pandora in the US pays a rate that is less than required by US statue and according to RAIN, is less than half of what royalty collection and distribution association SoundExchange was requesting Pandora and others pay in the future.
In return, RAIN reports Pandora has used “steering” to push Merlin recordings since the agreement was signed in August. Below is an excerpt published by RAIN of Pandora’s submission to CRB.
“[The agreement] obligates Pandora to engage in a minimum amount of ‘steering’ toward music licensed by the Merlin Labels.” [redacted sentence] “In exchange for these increased performances, Pandora receives a discount off the ‘headline’ per-play rate as Pandora relies more heavily on Merlin recordings, i.e., as it steers towards Merlin recordings. [redacted content] “This reduced per-play rate in exchange for increased plays is the central piece of the Merlin Agreement. This feature plainly demonstrates that the Merlin Agreement is embracing the workings of a competitive market.”
Pandora’s US service has been making moves to change its royalty structure for some time. In the first 10 months of 2012, Pandora paid $182.1 million in music royalties in the US, or 60% of its revenue. In October 2012 when the figure was released, Pandora’s founder Tim Westergren, blogged that the company was planning to lobby US Congress to reduce royalty rates paid to artists and labels. Last year, Pandora in the US paid $259-million for music costs (with a portion going to publishers, artists and labels), amounting to 61% of its revenue.
In Australia and New Zealand Pandora is licensed by rights associations APRA AMCOS and PPNZ, respectively. Pandora Australia has never spoken of the confidential terms of its agreement with those associations.
The news follows a study on streaming platforms which calls for 80% of services’ gross revenue to be paid to rights holders. As reported by Music Week, a study titled ’Fair Compensation for Music Creators in the Digital Age’, sees the International Council of Creators of Music (CIAM) demand fairer compensation on the current 60-70% of revenue that goes to rights holders. It also requests more transparency in the negotiating process between labels and streaming services.