Royalties from Pandora’s ad-supported radio service will continue to be paid to artists through SoundExchange, despite recent direct licencing deals with major music companies. The agreement both insures a major income stream for SoundExchange and maintains the performing rights organization's position as a protector of artists.
An agreement for SoundExchange to continue to serve as the distributor for royalties from Pandora’s ad-supported radio service has been completed with the approval of the major labels, Pandora's Glen Peoples announced in a blog post:
"As of late 2016, sound recordings are being licensed directly from record labels - a first in Pandora’s 11-year history. But Pandora and record labels have insisted on leaving unchanged the way artists are paid. Artists will still get their share of royalties for the performance of their sound recordings on ad-supported Pandora. And these royalties will continue to come from SoundExchange, the performance royalty organization tasked with collecting royalties from non-interactive digital services such as Pandora. As a result, over the next few years artists will get an equitable cut of a growing market worth many hundreds of millions of dollars annually."
The deal keeps SoundExchange, a trusted middle man, in a position to collect, distribute and, if needed, audit the flow of royalties from Pandora to artists.
"Ad-supported royalties accounted for the vast majority of the $253 million Pandora sent to SoundExchange in the first half of 2016... Streaming royalties are a cornerstone of today’s music industry. The volume of U.S. audio streams tracked by BuzzAngle increased 82.6 percent last year. Streaming was also the engineer of last year’s 4.2-percent gain in total U.S. music consumption across all formats. The number of streams in a given day, week or month are staggering and consistently growing. Purchases are dwindling. It’s a streaming world."