As War Of Words Heats Up, Is Pandora Really Underpaying Artists? [CHART]

image from 4.bp.blogspot.comThis week, musicians from Pink Floyd to David Lowery, have shared thoughtful and impassioned arguments taking Pandora to task for paying artists too little and their campaign to pay even lessLowery went so far as to offer payment records that showed his song had received 1 million plays on Pandora, and received a payment of $16.89.

'Lies' & 'Falsehoods'

Yesterday, Pandora founder Tim Westergren fought back calling many of the statements against the company inaccurate:

"The first falsehood being disseminated is that Pandora is seeking to reduce artist royalties by 85%. That is a lie manufactured by the RIAA and promoted by their hired guns to mislead and agitate the artist community."

As for the numbers provided by Lowery, Westergren wrote:

"There is a tremendous amount of misinformation being spread on this topic as well.  First we need to clarify what a “spin” on Pandora means. Each spin on Pandora reaches a single person, compared to a “play” on FM radio that reaches potentially millions of people. In other words, a million spins on Pandora might be equivalent to a single play on a large FM station."

For backup, Westergren pointed to calculations done by blogger Michael Degusta. He concluded, as the chart below shows, that Pandora paid over $1,300 for 1 Million plays, not $16.89.

image from media.theunderstatement.com
By his math:

  • Pandora paid a total of about $1,370.
  • The band received a total of about $585.
  • If Lowery received 40% of the performance royalty, “all he got" for the 1 million plays was in fact around $234.

"Whatever one thinks of the fairness of those numbers, they’re all clearly far larger than $16.89," concluded Degusta.

Is Pandora underpaying artists? 

Lowery's royalty statements are indisputable. Yet, Degusta's calculations matched standard industry practice and were confirmed by Westergren.

The fairness of Pandora's payment structure is part of a much larger issue: As music transitions from ownership to streaming, should the money earned by creators shift, as well? Or has the new paradigm inexorably changed the equation?  

MORE: I Made More From Selling A T-Shirt Than From 1 Million Plays On Pandora

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  1. Westergren actually makes accurate points here. I’m an artist as well, and I don’t get much out of Pandora $$-wise, but I think it’s important that the numbers be accurate.
    Lowery’s royalty statements in question are his BMI performance royalty statements, not his actual Soundexchange statements, which is the primary income Pandora is paying. The BMI statements are always low for radio/internet radio use. Those BMI royalties are split 50/50 between publisher and writer(s): so if he’s one of several writers, he’s only getting his share of the 50% that the writers get through BMI.
    Pandora pays out the larger sum to sound exchange, and that payment goes to the recording owners. So if he owns a portion of the recording, he would get that percentage of the soundexchange payment as well.
    The performance royalty thing is very arcane & confusing unless you’re in the middle of it, and the mechanics of it are a tough thing to convey in a short article where you try to explain Soundexchange royalties for the master recording and performance royalties for the publisher and the writers. I hate to say it, because I think Pandora underpays artists and writers and I’m tired of them trying to game the system, but Pandora’s info here is accurate and makes sense. It still sucks, but at least it’s a full picture of the royalty situation.

  2. This chart is a great example of how the information is skewed when it comes to indie artists.
    This chart represents the label’s deal with Pandora, which is where the 2 largest slices of the pie come in (84% of what Pandora pays to major labels for music).
    If you’re an indie artist, self-published and on your own label, or you release your music through an aggregator like Tunecore, the only portion of the pie chart that you’re entitled to is Songwriter (3%), Publisher (3%), ASCAP/BMI (1%) and Soundexchange (5%). So if you are an indie artist that is the sole writer and publisher and owner of the recording being played, you are receiving only 12% of the pie shown above. So if your song received the same 1,159,000 plays on Pandora, you wouldn’t receive $1,372: your total take for that 1,159,000 plays would be $164.64. If you share the ownership with 1 or more individuals (and thus publishers) then this $164.64 would be divvied up according to your ownership shares. If it’s an even 50/50 split, this many plays would net each of you $82.32. If you have 4 cowriters (like in a band) and all 4 of you in the band own the recording, then for 1,159,000 plays you would each receive $41.16.
    So again, the Cracker example might contain honest figures but it’s a little disingenuous from both sides of the equation: 1 band member doesn’t like that he only got $16 for 1.15M plays, but that’s not directly the result of Pandora: that’s because of his deal with his publisher and his label, and the fact that he’s 1 of multiple writers. But from Pandora’s side, they don’t see this individual band member: they see “here is what it costs us, bottom line, when this song receive 1.159M plays. We pay this amount” (which is then distributed according to existing contracts: their fee to the label & the publisher, fees payable pursuant to writer and publisher contracts, which also affect ASCAP/BMI payments, and the label agreement between the band and the band members.) It’s a lot of if-then scenarios.
    I think what would help in the apples-to-apples comparison is if Hypebot and Pandora did this same exact breakdown but for indie artists, in order to demonstrate what the dollars look like for an individual who owns 100% of everything. In that scenario, 1.159M plays doesn’t net $1372: the identical number of plays would only net $164.64.
    And suddenly you can see why it feels like there’s so much misinformation out there. The straight facts are hard enough to grasp, but add in a little spin or creative interpretation of the straight facts, and this stuff gets confusing FAST.

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