Music Business

Pandora Merlin Deal with 120,000 Indie Labels Pays Just 50% Of SoundExchange’s CRB Request

image from filed by Pandora with the U.S. Copyright Royalty Board (CRB) have revealed an until-now secret deal that the music streamer made with digital rights organization Merlin on behalf of 120,000+ independent record labels and distributors globally. Merlin's contract which was signed in August and includes Beggars, Epitaph, Domino, Yep Roc and many of the world's most important indie labels, pays a rate less than is now required by U.S. statue and just half of what SoundExchange was requesting that Pandora and others pay in the future.

Brad Hill of RAIN, who first analyzed the filing, explains current and proposed rate structures:

image from"Pandora’s statutory rate (the government-set rate) per song stream is $0.00130 – that is 1.3-tenths of a penny. Micropayments add up: Pandora paid out $259-million for music costs in 2013, amounting to 61% of its revenue…. 

In its submission to the CRB, Pandora argues for new rates within a range of $0.00110 to $0.00129. Note that the high end of that range, which would apply to 2020, is a micro-penny less than Pandora’s current (2014) rate.

The CRB submission from SoundExchange (the organization which collects and distributes streaming royalties for labels and artists) proposes higher rates in a range of $0.0025 to $0.0029."

Why Did Merlin Agree To Lower Rates? STEERING

When making the Merlin deal, Pandora promised to "steer" more listeners toward their independenmet label members, thus potentially driving more revenue. But, according to the deatils of the deal, the more plays that Pandora steers, the lower the rate it has to pay.  From the filing:

”Most notably, the Merlin agreement provides that as Pandora increases its performances of covered recordings — i.e., as Pandora ‘steers’ toward Merlin-label recordings and away from competing recordings its effective rate drops . Pandora has precisely that ability to “steer” towards or away from the music of particular record companies.”

The Truly Independent Artist Is Left Out 

"If Pandora plays Merlin songs more often than everyone else.  Isn’t that called payola?" writes The Trichordist's David Lowery. Pandora…(has) successfully outflanked performers by exploiting us where we were  weakest (and stupidest). That weak spot?  The independent label rights licensing association known as MERLIN."

More plays for Merlin labels also means less for everyone else. And what happens to the truly independent artist when all the major labels join Merlin's 120,000 indie labels to have listeners "steered" their way?

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  1. PAYOLA is back.
    Best part is, Pandora isn’t even that great of an online radio station.
    4 hrs go by, and whatever station youre on starts repeating all of the songs it did before. Sounds more like a playlist on shuffle to me. And trust me, I’d know, all my boss plays at work is pandora. Many different stations. and that’s the way it works.
    I say screw pandora, and use other online radio services. One’s that are fair to the independent artist as well as the huge bands.

  2. John Doe’s comment is adorable. First of all, payola never left. Second, Four HOURS go by and the station repeats songs? So they keep your attention for four hours – that’s about 3 hours 45 minutes longer than a terrestrial radio station does on average.
    Which online radio stations are fair to artists?

  3. On one hand, Pandora steers people towards newer, more obscure artists (At least they SAY they will). On the other hand they don’t have to pay as much money to those artists through their labels. I guess the model makes sense since Pandora’s accepting some risk for people not liking the Merlin songs, but at the same time I would really question their honesty about whether or not they really will steer the listener towards the independent artists. Who’s to say that they won’t just screw the little guy over like most of these music services?

  4. The Merlin deal was optional to members, & not all labels you’ve mentioned above chose to opt in. This must be based on an incorrect assumption.

  5. Should’ve performed more basic research. Merlin rates lower only after reaching a threshold that guarantees higher pay if met. The rate is the standard rate until the threshold is met, so the rate is not going down until that happens, and after that the rate lowers as a bonus for the higher play. Meaning that if they opt-in, their checks will not be smaller, and there is a strong incentive to make them larger.

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