Pandora, others must raise streaming royalties after Copyright Royalty Board ruling

Posted:
in General Discussion edited December 2015
The federal Copyright Royalty Board on Wednesday ruled to raise Internet radio royalty rates, meaning companies that offer ad-supported services, such as Pandora and iHeartMedia, will have to pay out increased per-stream fees starting next year.




Beginning Jan. 1, 2016, companies relying on mandatory government-issued licenses to deliver free, ad-supported music via the Web will pay what equates to 17 cents per 100 streams of a given song, reports The Wall Street Journal. The rate jumps to 22 cents per 100 listens logged by paying subscribers, according to the federal Copyright Royalty Board decision.

The new rates are valid through 2020 and can be adjusted for inflation.

Pandora, America's largest streaming music service, currently pays out 14 cents for every 100 free listens, or a 25 percent slice revenue, whichever is greater. Despite a position at the head of the U.S. Internet radio market, the company is struggling to reach profitability and has therefore paid out on the per-spin model.

Pandora also pays 25 cents per 100 streams on its $5 monthly Pandora One subscription service.

SoundExchange, which collects royalties for labels and individual artists, was pushing for higher rates between 25 cents and 29 cents for every 100 plays, or 55 percent of a streaming service's revenue.

"This is a balanced rate that we can work with and grow from. The new rate structure will enable continued investment by Pandora to drive forward a thriving and vibrant future for music," said Pandora CEO Brian McAndrews.

As the popularity of free streaming and on-demand music products increases, so does the friction between companies offering said services and record labels. Content owners and creators are fighting for higher rates as they see their business models further eroded by digital distribution trends, a revolution sparked by Apple's iTunes.

While slow going, there is progress being made toward amicable terms. For example, Pandora recently settled a battle over royalties for older music in October, agreeing to pay $90 million to major record labels including Capitol Records, Sony, Universal Music Group, Warner Music Group, and ABKCO Music.

The publication suggests Pandora will likely pursue contracts directly with record labels to expand its reach internationally as it takes on services like Spotify. The new rates dictated by the Copyright Royalty Board could play a factor in said negotiations.

Comments

  • Reply 1 of 13
    People keep dissing the Music interface, but damn, Pandora looks pretty bad.
    1983
  • Reply 2 of 13
    Even though Pandora is paying more, its stock price jumped after hours due to having to pay less than what was being demanded. This is the opposite of what happens to AAPL.
    redgeminipanostrathomas
  • Reply 3 of 13
    hill60hill60 Posts: 6,989member
    Hey Siri play chuck willis...

    ...I'll stick with Apple music.
  • Reply 4 of 13
    Hey Siri play chuck willis... "Sorry, but I can not help with that request. I do have some standards."
    hill60
  • Reply 5 of 13
    Even though Pandora is paying more, its stock price jumped after hours due to having to pay less than what was being demanded. This is the opposite of what happens to AAPL.
    Agreed.  And it jumped a LOT: Pandora is up 19% overnight. Another sign of Wall Street irrationality, especially in light of them having no meaningful P/E ratio since their earnings are negative. So.... (a) they're already not profitable, and (b) their costs will be increasing, so... Wall Street rewards them with a 19% jump in valuation. So strange.
    redgeminipajbdragon
  • Reply 6 of 13
    I'm sure all the extra royalties will pass through to the artists......NOT! 
    gatorguyjbdragon
  • Reply 7 of 13
    Even if they went up 10x, streaming still pays so incredibly low that if you don't have a huge hit, you make diddly squat.
    The long tail grows longer and thinner.
  • Reply 8 of 13
    jbdragonjbdragon Posts: 1,781member
    These streaming services already have a hard time making a profit as it is. Pandora is still losing money. Prices go up, people will FLEE and go right back to pirating music once again.
  • Reply 9 of 13
    trumptmantrumptman Posts: 16,447member
    Well I made money on Pandora. I just sold the stock I bought after the last thread about Pandora and how Apple music was going to hurt it. With this news the stock popped and I made 15% on my money. Now I have an extra $500 of house money for the next stock buy.
    gatorguy
  • Reply 10 of 13
    zoetmbzoetmb Posts: 2,297member
       bestkeptsecret said:
    People keep dissing the Music interface, but damn, Pandora looks pretty bad.
    Who cares?  When streaming, it's rare that you actually look at the interface anyway.    Looking at Pandora (at least the screen above, which I'm not sure is the screen that I see), you don't look at it and think, "wow, that's beautiful", but it does what it's supposed to do.   Channels on the left, track info on the right.   What more does one need?


  • Reply 11 of 13
    zoetmbzoetmb Posts: 2,297member

    jbdragon said:
    These streaming services already have a hard time making a profit as it is. Pandora is still losing money. Prices go up, people will FLEE and go right back to pirating music once again.
    Most people are using the free ad supported services, not the paid subscription services, so your use case really doesn't exist.   Besides, you can pirate tracks, but you can't really pirate a stream and people who stream are using it primarily the way people used to listen to the radio.    For the first half of 2015, the (U.S.) industry reported only 8.1 million paid streaming subscriptions, although revenue from that was much higher than the revenue from ad-supported.

    Artists and labels do deserve to get paid, no?   The industry is a third of its former peak size, if you adjust for inflation.  

    People who steal music, just because it's virtual, should be ashamed of themselves.   They've destroyed an industry (although the record industry itself certainly deserves a huge share of the blame as well).   It's shoplifting.        
  • Reply 12 of 13
    I'm sure all the extra royalties will pass through to the artists......NOT! 
    I'm sure the odds of Pandora going out of business have now increased significantly.
  • Reply 13 of 13
    zoetmb said:
       bestkeptsecret said:
    People keep dissing the Music interface, but damn, Pandora looks pretty bad.
    Who cares?  When streaming, it's rare that you actually look at the interface anyway.    


    No one apparently. It's only an issue if it's Music.
    badmonk
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