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

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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