Pandora’s New Direct Deals Are Very Bad News For SoundExchange And Potentially For Artists

Sound-exchange-logoHidden in the hoopla surrounding Pandora's direct deals last week, and the resulting launch of the Pandora Plus interactive streaming service, was the major blow they dealt to SoundExchange; and the confusion that they are causing indie artists who are wondering how they will be getting paid in the future.



Last week Pandora announced direct licensing deals with all 3 major label groups, Merlin and more than 30 independent distributors and labels, including The Orchard and CD Baby. These deals enabled Pandora to launch new interactive features and a new $5 tier last week, and paved the way for a full Spotify-like Pandora on-demand streaming music service later this year.

No More Statutory Rates And Protections

Pandora-logoA major side effect of these direct deals is that streaming on Pandora is no longer subject to the statutory rates set by the U.S. government and payable via SoundExchange.  Not only is this a major loss of income for SoundExchange, it also removes an important layer of protection and oversight that the not-for- profit performing rights organization provided artists. 

Pandora is estimated to account for as much as 70% of SoundExchange distributed revenue; so loss of a major portion of that income is a significant blow.

Up until now, Pandora has been paying the US statutory non-interactive webcasting rate of $.0017 per play for non-subscription and $.0022 per play for subscription to SoundExchange. The PRO in turn split the money between labels and artists, with SoundExchange paying the artist directly and without any of the delays or issues of recoupment that can happen when funds flow through a label.

But the new Pandora has enough interactive features that it no longer is covered by U.S. statutes. So far, only one major label group, Warners, has publically stated that it will pay the artist share via SoundExchange with no deductions.  

Payments For Independent Artists And Small Labels

For independent artists, payments from Pandora, just got even more confusing.  Here's how CD Baby explained it to their distributed artists:

How do I get paid for streams on Pandora?

There are a couple ways. If your music is currently available on Pandora and CD Baby has not delivered it there, then you will be paid for those radio streams via SoundExchange (like you do today). Once CD Baby delivers your music to Pandora, we will begin collecting a share of both subscription and advertising revenue and paying you directly (i.e., your music will be monetized on Pandora under CD Baby’s direct license, not by the statutory license like it is today).

For any streams on Pandora’s radio service, they will still make payments on behalf of the Featured and Non-featured artists to SoundExchange, so if you’re owed any of those royalties, it’s important that you continue to register your music with SoundExchange too.  More info on how that works here:http://www.soundexchange.com/artist-copyright-owner/digital-royalties.

confusedConfused yet?

Artists and small labels can expect even more confusion as each distributor sets its own policies. Despite the limitations of statutory licensing, the indie sector may soon be longing for the simplicity and transparency provided by SoundExchange. 


Share on:


  1. I administer royalties for a couple of pre-1972 artists. Pandora settled last year and my artists have not seen a penny. One in particular (Patti Drew – Capitol) averages about 120,000 streams per week. I tried to get some info on who is going to make that payout and this was Pandora’s response.
    Hi David,
    I work on the content licensing team and received your question below.
    You are right that we paid a settlement to to cover pre-72 royalties. The settlement was with Universal Music Group, Sony Music Entertainment, Warner Music Group, Capitol Recordings, and ABCKO. If your artists’ recordings were released by one of these labels, I’d suggest contacting the label; we’ve paid the settlement.
    For royalties going forward, you can look to your artists’ labels for those as well, as they are covered in our recently announced direct deals.
    All of this really put Artists in a bad predicament. Any one outhere know anything about pre-1972 Artists and streams?

  2. Yes. Confusing indeed.
    So, on Pandora’s FREE (to listeners) SERVICE, will Pandora continue to pay the statutory rates for our music that’s already been there on Pandora non-interactive online radio, EVEN IF CDBaby re-delivers that music?
    I’not asking about the $4.99 plus, or $9.99 on demand tier, I’m only asking about the Free tier.
    Steven Cravis

  3. Thanks for being the only article about this on the internet, presently.
    Who wrote this?
    I am an artist who has had music and royalties with Pandora/SoundExchange for years – and now, unexpectedly, CD Baby is suddenly collecting my royalties and taking a cut – no permission asked, no permission granted. (Apparently they sent an “opt out if you like” email to my spam folder). My SoundExchange payment went from $500/month to $30/month. needless to say, I’m very frustrated and upset, and will never trust CD Baby again. Trying presently to sort this out with Pandora, to ensure that if I “opt out” now, it can go back to how it was, instead of being forever ruined by CD Baby. Hopefully this can work.

  4. Dan – Sorry to hear you’re frustrated. Pandora is requiring this new arrangement in order to participate in their new streaming service. As you indicated, we did reach out to you by email. We also posted about it on our blog. Feel for yo contact us if you’re like to discuss further.

Comments are closed.