Documents 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:
"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?