Pandora Royalties: A Critique
Pandora, an online music streaming service that allows users to create personalized radio stations based on their preferred artists and genres, has been a popular platform for music lovers since its launch in 2005. However, the company’s approach to paying royalties to musicians and record labels has been a source of controversy and criticism over the years.
In this post, we will examine Pandora’s royalty system for artists and labels, the criticisms against it, and possible solutions to improve it.
How Pandora Pays Royalties
To understand how Pandora pays royalties, let’s first look at how the company generates revenue. Pandora is free for users with ads playing between songs. Users who want ad-free listening can pay $4.99 per month or $54.89 per year for a premium subscription called Pandora Plus. The service also offers an on-demand option called Pandora Premium for $9.99 per month or $109.89 annually.
When users listen to songs on Pandora, the company pays royalties to both performers (usually musicians) and owners of the sound recording (usually record labels). The amount paid depends on several factors such as:
– The type of license: There are two types of licenses that govern music streaming – mechanical licenses that cover song compositions’ rights and performance licenses that cover sound recordings rights.
– Listener hours: This refers to the total time listeners spend tuning into songs played through a particular station or channel.
– Advertising revenue: This is calculated based on advertising rates charged by Pandora.
Using these factors, Pandora calculates royalties using a complex formula known as “per-play rate.” In simple terms, this rate determines how much money each artist earns when their song is streamed once by a listener.
Criticism Against How Pandora Pays Royalties
While some argue that this system works well enough given current market conditions where most people prefer free versions with ads rather than paying subscriptions fees like Spotify or Apple Music, others criticize it for being unfair and insufficient.
One of the main criticisms leveled against Pandora is that it pays lower royalties compared to other music streaming services. According to a 2020 report by the Trichordist, an online music industry blog, Pandora pays just $0.001 per stream on average, which is significantly less than Spotify ($0.0038) and Apple Music ($0.00783).
This discrepancy in payment has led some artists like David Lowery of Cracker and Camper Van Beethoven to sue Pandora over what they claim are underpayments of royalties. In 2015, Lowery filed a class-action lawsuit against the company seeking damages worth $150 million for using his songs without proper licenses and failing to pay him adequate compensation.
Another criticism against Pandora’s royalty system is that it disproportionately benefits popular artists at the expense of lesser-known ones. This is because the “per-play rate” formula favors high-frequency plays over low-frequency ones.
For instance, if a listener streams a hit song multiple times per day on one station, that artist earns more money than another who gets streamed only once or twice daily on different stations despite having similar overall listening hours.
To address these criticisms and improve its royalty system for artists and labels, Pandora could consider several solutions:
1) Increase Per-Play Rates: One solution would be for Pandora to raise its “per-play rate” formula so that musicians receive higher payments per stream compared to current rates.
2) More Equitable Distribution: Another approach would be for the company to distribute royalties more equitably among all artists regardless of popularity levels or number of plays per day on specific channels or stations.
3) Engage with Musicians: A third alternative would be for Pandora management team to engage directly with musicians through meetings or conferences where they can discuss their concerns and suggestions regarding how best revenues from their work should get distributed fairly.
4) Transparency: Finally, Pandora could increase transparency about how it calculates royalties and what percentage of its revenue goes to musicians and record labels.
Pandora has been a popular music streaming service for over a decade. However, the company’s royalty system has faced significant criticism from artists and labels who feel that they are not receiving adequate compensation for their work.
While there is no one-size-fits-all solution to these problems, Pandora could consider measures such as increasing per-play rates, distributing royalties more equitably, engaging with musicians directly or openly sharing information on how it calculates payments to address these concerns. Ultimately though, any changes will depend on the willingness of both sides – Pandora management team and musicians – to work together towards a fairer system for all parties involved.