Pink Floyd - Money

It can’t be a coincidence that less than one week after Pink Floyd’s catalog was “unlocked” on Spotify, band members Roger Waters, David Gilmour, and Nick Mason published an editorial on decrying Pandora’s royalty payouts — or, more specifically, the payout system that would be put in place if the Pandora-sponsored Internet Radio Fairness Act (IRFA) were to pass. According to Pink Floyd — and a growing number of artists who have signed a petition to block the bill — IRFA would serve to “gut the royalties that thousands of musicians rely upon,” as paid by Pandora; per Floyd, it would amount to an 85% pay cut.

Yesterday, songwriter/activist David Lowery spoke up against Pandora/IRFA, too, in a blog post titled, “My Song Got Played On Pandora 1 Million Times and All I Got Was $16.89, Less Than What I Make From a Single T-Shirt Sale!” In the post, Lowery laid out in detail the royalties he’s paid by Pandora via the current system, and compared that to the royalties he’s paid by terrestrial radio and SiriusXM. Still, the bulk of his beef was with IRFA: “Why doesn’t Pandora get off the couch and get an actual business model instead of asking for a handout from congress and artists?”

Needless to say, both Floyd and Lowery have a legitimate cause for concern — IRFA or no, royalties paid by streaming audio services are not particularly robust. And the messages coming from Pandora founder Tim Westergren encouraging musicians to back the bill have been dubiously obfuscating at best.

But here’s the thing: IRFA is really, really confusing — not some black-and-white piece of devious legislation expanding the rule of robber barons. We wrote a massive Deconstruction of it last year, and even that addressed only some aspects of how the bill would affect artists. Slate published a fascinating piece on the topic last year, explaining how IRFA “might finally fix the messy Internet radio royalty system,” which does an excellent job of untangling the crazy mess of copyright law and broadcast royalties. (I encourage you to read it.)

Neither Floyd nor Lowery gets into the nuances of IRFA — which, per Slate, “could allow a promising industry to flourish, generating jobs, providing more revenue opportunities for artists, and giving more choices to consumers.” Yet Floyd’s connection to Spotify makes their motives seem questionable, regardless of their intent. As points out, IRFA applies to compulsory licenses: “This includes companies like Pandora and broadcast radio stations that stream their programming on their websites, but does not include services like Spotify that let you pick each song you listen to.” Meanwhile, Lowery’s suggestion that Pandora “get off the couch and get an actual business model” seems … kinda simplistic? It relies on the idea that the SiriusXM model is a viable one — except that SiriusXM reportedly has 24.4 million subscribers, while Pandora reportedly has more than 200 million registered users. Furthermore, according to Slate, “Sirius XM pays 8 percent of gross revenues for the use of sound recordings … Pandora, however, paid nearly 50 percent of its revenues in sound recording royalties.”

That’s the imbalance IRFA is ostensibly trying to correct, and if the bill fails, it could mean the end of Pandora — which might seem like a win for musicians now, but I see no guarantees the new boss is going to be a great deal more generous than any of the old ones.

Comments (11)
  1. Too confusing… I’m just going to continue buying everything on all three physical formats and worry about where to store them when / if my bachelor days are up later.

  2. Very well written. As a an artist in a band trying to figure out a way to make a living out of music in this current strange climate, I really appreciate you guys publishing these kinds of thoughtful articles on the subject.

  3. I honestly don’t care about internet radio at all, I listen to my own music i download, I have a big enough library that I don’t get bored so i see zero need for internet radio. I do have SiriusXM and its great, its the only form of radio i actually listen to. I think people that make all their money off of streaming music should pay the proportional amount to the artists, not that I know what it is, but for too long have radio stations, etc been able to make advertising money off generating listeners by playing popular music while paying no royalties.

    • Agreed. Plus, the audio quality on sites like Pandora is absolute crap. For me, it’s hard to enjoy listening to streaming audio when the quality is so bad.

  4. “Sirius XM pays 8 percent of gross revenues for the use of sound recordings … Pandora, however, paid nearly 50 percent of its revenues in sound recording royalties.”

    Maybe that’s because Pandora isn’t paying Howard Stern about a $100 Million a year.

  5. Long time reader, first time caller.

    I am the Executive Director of the musicFIRST Coalition, a coalition of groups representing artists (SAGAFTRA, AFM, the Recording Academy), independents (A2IM) and major labels (RIAA). Our mission is to fight for fair pay for music creators wherever their music is played.

    Respectfully, I think more information is needed:

    1. Let’s start where it ends: the failure of IRFA might mean the death of Pandora. The article is right that the failure of Pandora would be bad and, indeed, we want Pandora to succeed. The problem is that it’s just not true that Pandora will fail absent IRFA passing. A study released just last week shows that Pandora’s gross margin has increased 33% in the last year. Pandora has made a conscious choice to grow its user base and brand at the expense of revenues (not an irrational decision). Pandora’s leadership and industry analysts agree that Pandora has ‘reached a critical mass’ of listeners, and is now prepared to ‘monetize’ its dominant market position in Internet radio.

    And, even if it were not true, lets look at what IRFA does. It changes the standard music creators are paid from a “willing buyer, willing seller” standard to one where payments from the entity paying are lowered to the extent they “disrupt” the paying entity. In other words, it takes us from a standard intended to give artists a fair market value for their work to one that gives them below market value, as much as 85% less. Why should music creators give up 85% of their pay (when more than 90% of them get annual payments of $5,000 or less) to ensure Pandora’s bottom line. (Meanwhile Pandora officers are cashing out more than $1 million a month in stock options).

    2. Why do people think Pandora’s royalty payments are too high when apparently Pandora says it will do just fine under the current structure?

    Because Pandora says it pays 50% of its revenues in royalty payments and counts on the rest of us to ooooh and aaaaah that 50% seems too high. First, if they aren’t fully monetizing yet, as they have indicated, their revenues are artificially low and what they pay as a percentage of revenues is artificially high. (Indeed, they used to say 60%, now they say 50% and have even predicted 40%).

    Second, as the aforementioned economic study shows, lots of businesses pay 50% or more if revenues for the goods they sell. Lots of brick and mortar businesses. Lots of online businesses. Even online music businesses. If your business is selling a music listening experience, it strains credulity to say its a problem that barely of majority of your costs are for the music.

    3. Finally, and probably least importantly, why can’t it be a coincidence that the Pink Floyd op-ed was published around the same time as the Spotify deal when the surviving members of the band signed onto a letter with over 130 other major recording artists last fall essentially saying the same thing?

    Ted Kalo
    musicFIRST COalition

  6. The problem with streaming is that royalties paid per stream are similar to fess paid by for radio spins. That is not the same thing as a royalty for a download or CD sale *and* fees paid for radio play. Bands lose out because they don’t get royalties in this situation. It’s bad business for bands. If you want to support bands, you need to buy their stuff.

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