SoundExchange paid out $803m in 2015 – but its growth slowed right down

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US collection society SoundExchange paid out a record amount to artists and labels last year, with total year-end royalty distributions reaching $802.6 million.

That was up 3.8% from the $773.4 million paid out in the prior year.

The firm’s Q4 distribution also increased, totaling $211.4 million, up 16% from $182.8 million in 2014.

This is all undoubtedly good news for the music business, as 2,500-plus non-interactive Internet radio, satellite radio and cable radio services (including Pandora) continue pay increasing amounts to recording artists and rights holders through SoundExchange.

But here’s something to watch: the impressive growth of SoundExchange, perhaps inevitably, is starting to slow. And to quite a startling degree.

As you can see below, a 3.8% annual rise in distribution in 2015 was the smallest percentage growth for SoundExchange over the past eight years:

SoundExchange

SoundExchange2

(We don’t yet know SoundExchange’s total annual collection for 2015, just its distribution to labels and artists – hence the blank bar in that field above.)

SoundExchange certainly can’t help the fact that its key collection source, Pandora, is starting to struggle to add active listeners to its service.

Pandora’s active monthly listeners fell badly across the first three quarters of last year, finishing at 78.1m in Q3. (We’re waiting for Pandora’s Q4 results.)

Pandoratotal

It will be interesting to see how Pandora’s planned launch of a Spotify-esque on-demand streaming tier affects SoundExchange’s numbers in 2016, as the CMO only collects from non-interactive digital services.

Particularly as insiders tell us that labels are increasingly striking direct deals with Pandora (although the artist side of the royalty equation will continue to go through SoundExchange in this case).

Then again, SoundExchange will likely see a small boost from changes to the statutory licensing rate for free streaming ‘radio’ platforms, which will increase this year thanks to a decision by the Copyright Royalty Board.

SoundExchange also collects from the likes of Sirius XM (satellite) and iHeartRadio’s (digital).

“As we close the books on a historic year in distributions for SoundExchange, we are looking forward to 2016. In the year ahead we will continue to develop products and services that help the music industry run more efficiently, increase the velocity of payments and reduce friction,” said SoundExchange President and CEO Michael Huppe (pictured).

“We believe 2016 will be our best year yet, and we are eager to share this ride together.”

SoundExchange’s other 2015 achievements included:

  • Paying more than $3 billion cumulatively in digital royalties to recording artists and labels since 2003.
  • Helping introduce the Fair Play Fair Pay Act, sponsored by Representatives Jerry Nadler (D-NY) and Marsha Blackburn (R-TN) in April.
  • Participating in the Copyright Royalty Board’s (CRB) Webcasting IV case, which set royalty rates and terms for webcasters using the statutory license for 2016-2020.
  • Hosting the SoundExchange Influencers Series at the Bluebird Café in Nashville featuring BeBe Winans, Jonathan McReynolds and Alexa Cruse.
  • Appointing music legend David Byrne to the SoundExchange Board of Directors.
  • Reaching a settlement agreement with National Public Radio (NPR) and the Corporation for Public Broadcasting (CPB) on royalty rates through 2020 for webcasting by public radio stations.

Music Business Worldwide

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