Artist’s Pandora SoundExchange payments now go directly to UMG

Since SoundExchange’s inception in 2003, 50% of song royalties from Pandora have been paid directly to artists after the digital PRO takes a 4.6% administrative fee.

But artists whose records were released via UMG are now seeing their payments drop significantly to rates matching those they receive from on-demand streaming services like Spotify.

The fear is that other labels will follow suit.

Pandora’s payments are now being sent directly to UMG, which calculates the artists’ share based on the lower rates within their record deals. If the artist is unrecouped, that could mean no payments at all.

“That specific royalty stream can range from a couple hundred dollars per month to a couple thousand. It can be a significant amount of money,” Matt Najdowski, royalty manager for Farris, Self & Moore, told Billboard, which he says “is more or less taking money out of (the artist’s) pockets.”

UMG was able to make the change because Pandora added interactive features, including a service that competes with Spotify. This meant new deals with labels that were different from the government-mandated standard rate compulsory license. Other record labels could easily decide to do the same.

However, some business managers are questioning if all of Pandora’s streams should be calculated the new way. “We’re still running analysis on it,” says Erica Rosa, owner/vp of royalties and contract compliance at business management firm FBMM “I’ve asked a lot of questions to attorneys and various industry figures: ‘How would you define Pandora? Would you consider it to be an interactive or non-interactive stream? I don’t know that anyone has given a clear definitive answer yet.”

Bruce Houghton is the Founder and Editor of Hypebot, a Senior Advisor at Bandsintown, President of the Skyline Artists Agency, and a Berklee College Of Music professor.