In a blog post appearing at Medium and distributed by Pandora, the company’s Music Insights and Analytics chief, Glenn Peoples, notes that with the streaming audio company’s long-awaited rollout of its on-demand, subscription-based Pandora Premium, there are three tiers and, thus, three ways for artists and labels to connect with listeners and earn royalties. There are also a few different ways royalties get to artists and labels, and Peoples explains just how Sirius XM and AM and FM radio differ from Pandora.
By Glenn Peoples
A subscription premium service is different than a radio service. Direct deals with rights holders allow a premium service provide a high level of interactivity: select and play specific songs by specific artists; create playlists; skip forward and backward an unlimited number of times; and download tracks for offline listening. This combination of features goes well beyond what a non-interactive radio service can offer.
Not every track heard in Premium is covered by a direct license, however. When a license has not been obtained directly, Pandora will utilize the compulsory license available to non-interactive digital services. This is the approach Pandora took until direct deals were signed last year. For these tracks not licensed directly, Premium listeners will hear the track only on radio stations — that means no on-demand availability — while Plus and ad-supported listeners will lose the interactive features that allow for replays, skips and online listening (more on Plus in the next paragraph). And for these tracks not licensed directly, all royalties are paid to SoundExchange for distribution to artists and labels.
For spins on the ad-supported tier, artists are continuing to receive their royalties through SoundExchange just as they did before the direct deals. Even though direct deals were put in place, both Pandora and record labels feel that routing royalties through SoundExchange is fair to artists and should be continued. (This means artists receive the ad-supported royalties regardless of the terms of their label contracts.) SoundExchange takes its usual fee of roughly 4.6 percent (its 2015 rate); the performance rights organization says it has “the lowest administrative fee of any major collective management organization in the world.” Given the size of the ad-supported tier, the vast majority of artists’ radio royalties will take this route.
Pandora Plus is the result of these direct licenses. Plus is an upgraded version of Pandora One, the $4.99-per-month, ad-free service that complemented the core ad-supported tier. Plus gives users with unlimited skips, replays, and a handy offline listening feature that automatically downloads a user’s three favorite stations and Thumbprint Radio, the station based on the entirety of a user’s thumb history. When a user is outside of cellular service — a dead zone, an airplane, a subway — Plus users can listen to the downloaded stations.
Like Pandora One before it, Plus pays a royalty rate that’s higher than the ad-supported rate. One difference, however, is that Plus’s royalty rate is not made public. This is a shift from Pandora One’s system. Pandora One paid a predetermined, per-stream rate set by the Copyright Royalty Board every five years. Again, details vary from license to license and are confidential. But for some context, in 2016, before the direct deals were in place, the statutory rate for subscription radio services was 0.22 cents, or $0.0022, per spin. (See the Copyright Royalty Board’s decision here.) A single spin on Pandora One would generate that 0.22-cent royalty.
Plus royalties now follow the typical path taken by subscription royalties. Up until the direct deals, artists and labels received Plus royalties from SoundExchange. But, as is the norm with subscription services operating under direct licensing agreements, Plus is paying all royalties directly to labels. If track is not covered by a direct license, Plus reverts to the statutory license and the track lacks the interactive features enjoyed by licensed tracks.
Regardless of product tier, Pandora provides transparency into what people are hearing. With the free-of-charge Artist Marketing Platform, or AMP, an artist is able to see total stream counts, the most popular songs and markets with the most streams, and streaming activity over different time periods. A related tool, called Artist Audio Messages, lets an artist record a short message that will stream to fans. The message could be a “thank you,” an offer to hear a new track, or call-to-action to buy an album or concert ticket. It’s a powerful suite of tools. The streaming data is especially pertinent to the topics of this article. SoundExchange doesn’t provide transparency into streaming at different services. Record labels and distributors don’t provide information on streaming activity, either. AMP tells an artist which songs are hot, charts daily streams over a period of time, and shows markets ranked by most streams.