Sony/ATV to get 25% higher Pandora royalties


PandoraMusic publisher Sony/ATV has upped the cost of doing business—with Pandora and probably more music sites down the road. The agreement may come as a surprise to some, as Pandora has been crying that it needs decreases in the fees it pays to the music business and artists to become profitable.

A NY Post exclusive report said Pandora execs have been huddling with Sony/ATV management to hash out a new deal that is said to run for all of 2013. CEO Martin Bandier told The Post: “At the end of the day, we got a terrific deal for our songwriters. Our thinking has been vindicated. Hopefully it’s the first of many.”

The firm will now seek better deals from other digital music players, the story said. As well, the deal could spark a domino effect as other music publishing firms weigh negotiating their own digital music rights outside of collective deals struck by ASCAP and BMI collecting on behalf of publishers and song writers.

Those royalty agencies collect around 4% of Pandora’s total gross revenue on behalf of copyright holders. Pandora’s gross revenue was $274.3 million in 2012.

SoundExchange collects on behalf of artists and record labels and takes the vast majority of fees from Pandora. Pandora has been fighting the increases and sued ASCAP in November arguing there was little negotiation in its talks.

Pandora said on Jan. 7 that listener hours in December jumped 54% to 1.39 billion from the prior year. It claims its share of total US radio listening for the month rose to 7.2% from 4.7%. Active listeners also increased 41%.

See the NY Post story here

RBR-TVBR observation: While this may seem tough on Pandora at first, the red flag we see is this was done outside of collective deals struck by ASCAP and BMI. This may eventually create more of a market-driven negotiating environment, where the middlemen–digital music rights organizations—are left out of the relationship. Stronger music publishing houses would get higher royalties; weaker ones would get less—market-driven. The direct-dealing trend is already being seen with the Big Machine-Clear Channel Media & Entertainment deal.