Pandora’s New Direct Deals Are Very Bad News For SoundExchange And Potentially For Artists

Hidden in the hoopla surrounding Pandora's direct deals last week, and the resulting launch of the Pandora Plus interactive streaming service, was the major blow they dealt to SoundExchange; and the confusion that they are causing indie artists who are wondering how they will be getting paid in the future.

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Last week Pandora announced direct licensing deals with all 3 major label groups, Merlin and more than 30 independent distributors and labels, including The Orchard and CD Baby. These deals enabled Pandora to launch new interactive features and a new $5 tier last week, and paved the way for a full Spotify-like Pandora on-demand streaming music service later this year.

No More Statutory Rates And Protections

A major side effect of these direct deals is that streaming on Pandora is no longer subject to the statutory rates set by the U.S. government and payable via SoundExchange. Not only is this a major loss of income for SoundExchange, it also removes an important layer of protection and oversight that the not-for- profit performing rights organization provided artists. Pandora is estimated to account for as much as 70% of SoundExchange distributed revenue; so loss of a major portion of that income is a significant blow.Up until now, Pandora has been paying the US statutory non-interactive webcasting rate of $.0017 per play for non-subscription and $.0022 per play for subscription to SoundExchange. The PRO in turn split the money between labels and artists, with SoundExchange paying the artist directly and without any of the delays or issues of recoupment that can happen when funds flow through a label.But the new Pandora has enough interactive features that it no longer is covered by U.S. statutes. So far, only one major label group, Warners, has publically stated that it will pay the artist share via SoundExchange with no deductions. Payments For Independent Artists And Small LabelsFor independent artists, payments from Pandora, just got even more confusing. Here's how CD Baby explained it to their distributed artists:There are a couple ways. If your music is currently available on Pandora and CD Baby has not delivered it there, then you will be paid for those radio streams via SoundExchange (like you do today). Once CD Baby delivers your music to Pandora, we will begin collecting a share of both subscription and advertising revenue and paying you directly (i.e., your music will be monetized on Pandora under CD Baby’s direct license, not by the statutory license like it is today).For any streams on Pandora’s radio service, they will still make payments on behalf of the Featured and Non-featured artists to SoundExchange, so if you’re owed any of those royalties, it’s important that you continue to register your music with SoundExchange too. More info on how that works here:http://www.soundexchange.com/artist-copyright-owner/digital-royalties.

Confused yet? Artists and small labels can expect even more confusion as each distributor sets its own policies. Despite the limitations of statutory licensing, the indie sector may soon be longing for the simplicity and transparency provided by SoundExchange.