Can’t Pandora and Musicians Just Get Along?

In the spirit of compromise, both sides should agree on several points.

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Jared Newman /

Most people are happy with Pandora as long as the music keeps streaming. But now, some very well-known musicians are hoping people will take notice of the company’s business practices, which the artists claim are harmful.

In an editorial for USA Today, the surviving members of Pink Floyd–Roger Waters, David Gilmour and Nick Mason–accuse Pandora of trickery. They point out that Pandora has been e-mailing artists and asking them to sign a “letter of support” for Internet radio, while neglecting to mention that one of the company’s major business goals is to reduce the royalty rates it must pay to songwriters and performers.

Specifically, Pandora has been lobbying Congress to change the way royalties are calculated for Internet radio, which is currently treated differently than satellite or terrestrial broadcasts. A bill introduced in Congress last year went nowhere, but Pandora may try again if it can muster the support of more artists.

“Fine print is one thing,” Pink Floyd’s members wrote. “But a musician could read this ‘letter of support’ a dozen times and hold it up to a funhouse mirror for good measure without realizing she was signing a call to cut her own royalties to pad Pandora’s bottom line.”

Pink Floyd isn’t alone in this fight. On the same day as the USA Today editorial, David Lowery of the band Cracker bemoaned the $16.89 he received in songwriter royalties for more than 1 million plays of the song “Low.” “Here’s an idea,” Lowery wrote. “Why doesn’t Pandora get off the couch and get an actual business model instead of asking for a handout from congress and artists?”

As a listener–both to Pandora and the musicians who are attacking it–I’m sad to see both sides fighting. The listeners lose if Pandora goes away, or if musicians take their ball and go home. (Technically, they can’t pull out of Pandora due to compulsory licensing rules, but some workarounds exist.)

So in the spirit of compromise, both sides should agree on several points:

Pandora’s Royalties Are Never Going Make Artists Rich

Despite 1 million plays over three months, David Lowery can’t even crack $20 in quarterly revenue on Pandora. Lowery argues that royalty rates should not be lowered further, but he’s actually undermining his point by showing how worthless Pandora is as a source of money in the first place. No one is arguing that Pandora should pay higher rates, but that’s what would have to happen for it to become a significant revenue source.

As Lowery himself points out, he makes more money by selling a t-shirt or two. But there’s a good chance Pandora can help out with that. By playing music the listener hasn’t heard before, it connects people to new artists, so they can purchase music, go to concerts and buy merchandise. Which brings me to my next point:

Pandora Needs to Be a Better Promoter

If Pandora’s argument is that it helps people discover new artists, leading to more money spent on music, concerts and merchandise, it’d help if Pandora actually did more to promote those things.

A couple examples of where Pandora fails in that regard:

  • You can’t look up your entire listening history on Pandora. The only way to save songs for future reference is to “Like” them, which isn’t practical if you’re driving, cooking or otherwise distracted.
  • Pandora doesn’t provide any concert information about the bands you’ve liked or created stations from, nor does it offer any opportunities to buy band-related merchandise.

Pandora does include links to iTunes and Amazon, but that’s just one thing the company could do to promote musicians, and it’s not particularly creative. Artists might not be so worried about direct revenue if Pandora was doing more to help them connect with listeners.

The Grocery Analogy Is Bogus

“[A] business that exists to deliver music can’t really complain that its biggest cost is music,” Pink Floyd writes. “You don’t hear grocery stores complain they have to pay for the food they sell.”

This analogy–seemingly borrowed from musician Blake Morgan–doesn’t make sense. For one thing, grocery stores do not rely on giving away free food to lure shoppers inside, where they must listen to ads and potentially buy more food at a premium. It’s a different business model.

Also, if the cost of food goes up, grocery stores can pass that cost on to the customer. Pandora’s only options are to enforce a listening cap, which it has done, or increase its number of ads, which risks driving users away and may not make up for rising royalty rates anyway.

Pandora Should Be Clearer About What It Wants

Got some time to spare? Here’s a fun challenge: Figure out specifically how much of a drop in royalty rates Pandora is seeking. I’ve seen estimates ranging from a 50 percent reduction (according to an analyst) to 85 percent reduction (according to dismayed artists), but nothing solid from Pandora, and no indication of whether other radio sources, such as satellite and terrestrial, should pay higher rates to balance the scales.

In a letter to Blake Morgan, Pandora CEO Tim Westergren said there’s been “a lot of misinformation put out about our intentions,” and claimed that Pandora has “no desire to lower royalties dramatically,” but he was vague about what the company actually wants. The fact that Westergren’s initial e-mail contained no mention of royalties definitely comes off as trickery. In that sense, Pink Floyd’s argument definitely has merit.

To put all this another way, both sides need to mellow out, man. Musicians should stop painting Pandora as an evil and unprofitable company that’s beloved by millions of users, and Pandora should be truer to its words about wanting to help those artists out. There’s got to be a way for Pandora and musicians to thrive. They just need to get along well enough to figure it out together.