A storm is brewing in Pandora Media Inc (NYSE:P)’s box
Of late, Pandora Media Inc (NYSE:P) has been in the public eye, and for all the wrong reasons. Pandora’s CSO, Tim Westergren’s behavior and statements have been raising quite a few eyebrows lately. This is specifically with reference to different positions that Pandora as well as its founder has taken surrounding royalty payments. Anger and disappointment and protests from music-makers and music-lovers have rent the air. The surviving members of the music group, Pink Floyd courageously reunited and penned an Op-ed on various concerns and questions of modern royalty-fairness.
Why the fiasco?
The main contention that everyone has is that royalty payments that come from radio, whether internet, satellite or terrestrial (AM/FM), are unfair and uneven. Every party involved in this argument feels that they are unfair and feel that they are either getting too little or over-paying. This is primarily because internet, satellite and terrestrial radio all pay varying rates.
It can be challenging to parse radio royalties; however they fall in two distinct categories. The song itself attracts a royalty and there is one for the song’s performer. Internet radio and satellite pay both. On the other hand, terrestrial radio, which is an older concept, didn’t pay the performer royalty at all and there has been no change in that over the years.
So, what is the issue about then?
The DMCA gives Internet radio operators or webcasters the right to use any recorded music they choose to, and they pay fixed royalty rates in lieu of that. The SoundExchange controls this. It is an organization that works somewhat like an ASCAP for these particular fees. Instead of the record labels, the artists get a direct payment. Webcasters have very recently managed to dodge a bullet when it came to hiking royalty rates. However, they think it’s unfair that they are the ones who end up paying for sound recordings while regular radio-stations don’t. As a matter of fact, there is a possibility that Internet radio operators like Pandora may eventually team-up with record labels to lobby that everyone across the board pay for the music It goes without saying that if broadcast radio begins paying, labels may let up their fight against webcasters.