Pandora: Our $0.001 per stream payout is ‘very fair’ on artists. And besides, now we can help them sell tickets.

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Pandora founder Tim Westergren has claimed that the company is paying out “very fair” sums to artists, despite its per-stream royalty weighing in at nearly one sixth of Spotify’s.

The digital personalised radio platform has previously gone on-record as saying that it pays music rights-holders approximately US $0.0014 for each play of their tracks: Westergren blogged in 2013 that Pandora pays ‘around $1,370 for a million spins’.

That’s approximately 80% smaller than Spotify’s per-stream payout, which officially stands somewhere between $0.006 and $0.0084. (This can quickly add up if you have a global smash hit: just ask Mark Ronson.)

Interestingly, Westergren (pictured) and his executive team are currently battling SoundExchange  to try to bring down Pandora’s permitted per-stream royalty rate, to $0.0011. The US Copyright Board will confirm whether the digital radio service is successful in its bid later this year.

Digging into Pandora’s recent financials tells us why it’s on this mission: its model is clearly hurting.

The firm’s total payments to labels and publishers in FY 2014 stood at $446.4m – close to half of its total revenues of $920m.

“We’re projecting over a billion dollars of revenue next year… and we’re sharing that revenue very fairly with artists.”

Tim Westergren, Pandora

Last week, Westergren unveiled a new feature on Pandora that will allow artists to record short audio messages that can then be played directly to their fans as part of their personalised listening experience. Lenny Kravtiz is one of the performers taking advantage of the pilot.

This feature will form part of Pandora’s AMP toolbox, which provides artists and their managers with ‘data-driven insights’ about how their particular fan-base is behaving on the platform.

Westergren explained at Re/Code’s Code Media conference in California: “AMP allows artists to login and have access to all the data around their music. Artist Messaging is the next chapter.

“Imagine this: you’re in a band and you decide, let’s stop in Portland and play a show, impromptu. You login to your smartphone, open your Pandora AMP account, zoom in and look at your audience there, then record a 15-second piece of audio that says: ‘Hi this is John from such-and-such… We’re playing tomorrow, see you there.”

It’s not shown in Re/Code’s video below, but apparently that’s not all he said. According to Bloomberg, Westergren added that because the Artist Messaging could drive merch and ticket sales, “the revenue it will generate per artist will dwarf royalties”.

Back to what you can see with your own eyes below: Westergren also directly answered the question about the level of royalty payouts that Pandora takes on.

He said: “We have an enormous royalty burden – we pay north of 50% of our topline revenue in royalties, and we’re really creating a new category in advertising… this is a company that’s building a product that consumers love, with 80million-plus [users] a month.

“We’re working tremendously hard to build a business behind that. We’re projecting over a billion dollars of revenue next year… and we’re sharing that revenue very fairly with the artist community.”

Pandora is currently embroiled in a court case with US musical works collection society BMI, which is demanding that its members share 2.5% of Pandora’s total revenues. The platform currently pays out 1.75% to songwriters and publishers.

This figure roughly equates to 6% of Pandora’s per-stream royalty, according to company-endorsed estimates, with labels, artists and non-featured performers sharing 88%. The remainder is paid in fees to collection societies such as BMI, SoundExchange and ASCAP.

Pandora posted a $30.4m net loss in 2014, despite seeing user growth of 7% to 81.5 million people.

Music Business Worldwide

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  • jonathan segel

    First off, you can’t sell tickets to anything if you can’t afford to tour. “Dropping in” on a city and announcing a show? What world does he live in? Beyond just the booking problems, the majority of recording artists can barely afford to play shows in their own area. He’s referring to bands on the level of the top 1%.
    Second: sharing revenue fairly with artists… right, because management of Pandora need to get paid out their $120million every year and artists don’t need that. They fight against paying out another $10 million while he and the executives sell off hundreds of millions in stock every year.
    Third and foremost: Why should we care what percentage of the company’s income is paid out in royalties if it’s still not much money for the artists? I don’t care if they pay out 100%, if they’re not keeping their very content providers alive. He speaks as if Pandora has some inherent right to exist, and they really don’t. The entire tech industry believes in its own privilege. Westergren is sick.

  • lacarlson

    It’s not proper to compare Pandora to Spotify. They perform two different services. Pandora is the equivalent of a customizable radio station. You cannot pull up a song on-demand. Spotify can be used instead of purchasing albums. You can create playlists or play any song or album on-demand. Apples and oranges. If you want a comparison, what does an FM radio station or XM radio pay an artist per song play?

  • Mike Jone

    I think we also need to remember that Pandora has one goal. Buyout from big tech firm to cash out and make as much money as possible. Pandora has no concern about the long term welfare of artists.

    Everything Pandora is doing is to maximize their short term numbers. Other streaming/music sites seem to moving towards long term beneficial agreements.

  • Ok. Pandora pay “north of 50% of our topline revenue in royalties”. So they buy a product (access to music) and sell it for twice that sum. Those are quite good terms for Pandora. Spotify pay 70% to the owners of the music.

  • @Larson That’s misleading. Pandora actually occupies a space between radio and Spotify. I can’t tell FM or XM what artist to play next. I can try and call, and hope they take my suggestion, but if the song isn’t on their playlist they won’t do it. Pandora will play the artist I want to listen to right away, and then play a bunch of artists that sound like the artist I want to listen to. There’s not as much interaction as Spotify, but there’s more than in radio. And as you increase the interactivity, you decrease the need to actually buy music.
    All of these services seem fixated on the fact that music is a loss leader for tours. But historically tours have been a loss leader for music sales.

  • LuciousOne

    The only business model that trumps Pandora’s exploitation of their “Partners” is the NCAA. If only this smug prick could figure out how to make it a rule that the Artists CAN’T get paid.

  • bob

    The bottom line is: The vast majority of artists and (especially!) writers get paid “spit” while Streaming Companies CEO’s, share-holders, and investors rake in millions through legalized piracy. I’ve pulled my stuff from practically every service but iTunes, CDBaby, and Amazon with video excerpts on YouTube as my advertising. Guess what? I’m selling far fewer streams at $0.00014 each, yet I’m making significantly more money from actual downloads! Yes, it’s true. We need to push RIAA, ACSAP, BMI, and the LOC to setting minimum rates of 1 cent per stream. If Pardora and the others can’t make money off of this, then there needs to be new business models made. Till then, I’ll only let my music be sold or performed live.