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If Pandora Can Write Lil Wayne A $3 Million Check, Why Should They Pay Less? [Commentary]

image from www.google.comPandora founder Tim Westergren says they'll pay 2000 artists over $10,000 dollars each over the next 12 months with 800 making $50,000 or more. Top earners like Coldplay, Adele, Wiz Khalifa, Jason Aldean are getting $1 million check;  and Drake and Lil Wayne's earning are "fast approaching" $3 million a year each. The disclosures come at a time when Pandora is lobbying hard to reduce streaming rates.


Telling the world that you're paying many artists fat stacks may seem an unusual strategy when advocating for lower royalty rates, but Pandora is a very uprofitable company.  Much of the reason for the loss, according to both Westergren and most outside analysts is that by federal statue, they pay about 50% of all revenue as royalties. That's a rate much larger than over-the-air broadcasters pay.

Those that want to vilify Pandora, often wrongly place it on the same category as non-demand music streamers Spotify. A much more accurate comparison is to an FM radio with an infinite dial. You can't hear a particular song when you're craving it, but you can probably find a station that fits your overall taste and mood.

There is also real evidence that Pandora drives legal download sales. According the NPD Music Acquisition Monitor study: "Overall music purchasing was down in the last year, while the average Pandora listener purchased 29% more music during the second quarter of 2012 compared with last year. Additionally, Pandora listeners' music acquisition came increasingly from legal purchases, while non-listeners showed a decline.

Consumer's have spoken. Pandora now accounts for just 6.5% of radio listening in the U.S. The music industry has two choices:

1) take  Pandora's money until the well runs dry

2) work with them to help them grow.