How Does Pandora Pay Artists?

There are plenty of streaming music services like Pandora out there, with Apple becoming the latest to enter the marketplace with their recently announced and forthcoming iTunes Radio. But how do these Internet radios pay for the music they play?

In the United States, royalty rates are determined by a government entity called the Copyright Royalty Board. It consists of three appointed copyright royalty judges who each serve staggered six-year terms and meet with petitioning entities who have vested interests in their decisions.

Currently, under a deal worked out in 2009, Pandora pays record labels about $1,200 for every million songs played, which amounts to $0.0012 per song. The labels then split these royalties with the artists, meaning the singers you love receive an even smaller cut. Pandora also pays out $0.0002 per song to musicians, songwriters, and publishers (that’s $200 for every million songs played). The deal dictates that rates go up $100 per million songs each year through 2015.

Still, even with these seemingly small numbers, Pandora paid out more than $214 million in royalty fees last year, almost 50 percent of their total revenue. In order to keep royalty fees from cutting into their profits, Pandora is hoping to renegotiate lower rates during hearings with the Copyright Royalty Board, which will begin this coming January. Others aren’t too thrilled with this idea. National Music Publishers Association President/CEO David M. Israelite recently penned an open letter to new Pandora President Brian McAndrews, calling for respect and fair compensation for the creative contributions of songwriters and stating that “for one million plays of our songs on Pandora, songwriters and publishers earn less than $60.”

So, the lesson for now? Unless you’re Rihanna or Beyoncé, don’t bet on Pandora helping you make it to that first million.

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  • LupineMP3j

    That sounds bad to us, but consider a few things.

    Much of an artist’s revenue comes from tours, events, and merchandise. Face it; sales and royalties are for the record companies.

    About 60 dollars is one million plays. How many times do these songs get played? Don’t forget, these are plays, not sales. Sales tend to happen once, while plays happen more than once. Don’t believe me? Listen to Pandora for a couple hours.

    (Again) These are plays, not sales. Any artist with a manager who knows what he’s doing has a presence on iTunes and the like. Pandora is not an artist’s only source of income, even among Internet radio companies (Spotify and now iTunes Radio are also there).

    Many artists do earn quite paltry sums, but I don’t think it’s always as bad as this article makes it out to be.

    • Alex Spishakoff

      yup

  • music lover

    this is not the first time we have heard the ‘artists getting skinned’ plea. but the facts are not so simple. these prices were negotiated by the artists’ legal representatives who think they got the best deal they could get at the time. also the ‘artists being cheated’ plea always fails to mention that artists being are paid by their labels. radio stations pay the royalty company (who gets a cut) and sends the rest to the label who takes a cut and so on. royalties is a very complex ecosystem.

  • 615music

    Why this is a bigger issue now in 2013 is because there are more independent artists in the mix. Internet radio stations are how these independents get airplay. Terrestrial radio stations won’t even acknowledge their existence until they sign with a big label thanks to the Clear Channel dynasty. Also, independents don’t get the opportunity to negotiate a deal with Pandora, etc like the big labels. They have to take the deal as-is. So Pandora’s plea to negotiate a lesser royalties rate because it’s cutting into their profits is nothing more than a whine from a child when you realize the number of independent artists Pandora is paying vs big labels. $60 to a big label isn’t that big of a deal BUT $60 to an independent artist is. So next time you hear about the Pandora renegotiation attempt, don’t think about the Beyonces or Jay-Zs out there, think about the independent artists that will have a lot more ripped from their wallets.

  • Yves

    this is basically a little more money for the artist. they shouldn’t ask for more because its not like the customer is actually buying the cd they are just listening to it on the radio, the artist should be grateful pandora made this platform so they can make a little more money.

  • Anon

    This is for Pandora Internet RADIO. I’d like to see how this compares to, say, a radio station with a million listeners playing one song? It’s still one million plays.

    Frankly, the artists should be happy to even be featured at all, ESPECIALLY THE INDIES. Radio is about getting heard, not direct cash income. Pandora is getting them new fans, and that’s what creates sales of their product. A lot of my recent music purchases have been tracks and artists that I found because of Pandora.

    As an artist, Pandora is paying for all of the equipment, bandwidth, and personnel needed to find people all over the world who might like my music and asking them to have a listen? They even give them a link to go buy a copy?
    Where do I sign up for that?
    What? You’re saying they should be paying ME??