How Pandora screws songwriters

By Adam L. Penenberg , written on July 15, 2013

From The News Desk

It’s no secret that many artists feel like they are getting a raw deal from digital music. Lou Reed compared recent royalty checks he’s received for songs downloaded on iTunes to the $2.60 he made playing a gig in a bar when he was 14. But it’s Pandora that seems to receive the brunt of artist anger.

Recently members of Pink Floyd went after Pandora in an editorial that accused the webcaster of “unscrupulous behavior” by “tricking” artists into supporting the company’s campaign to cut royalties it pays to match those of cable and satellite radio. In November, 125 musicians, including Billy Joel, Sheryl Crow, Robert Plant, Britney Spears, KISS and the Pointer Sisters, criticized Pandora in an open letter. “Pandora's principal asset is the music,” they wrote. “Why is the company asking Congress once again to step in and gut the royalties that thousands of musicians rely upon? That's not fair, and that's not how partners work together.”

The NAACP sent a letter to House Judiciary Committee leaders claiming the much-maligned Internet Radio Fairness Act, if passed, would “start a race to the bottom in performers' compensation” because it would "mandate that more than 1,800 Internet radio stations pay recording artists and musicians far less than their recordings are worth, just because a very few, older, digital services do.”

Recently Verge writer Greg Sandoval dubbed Pandora “music’s big villain.”

While performers may feel they are getting a raw deal, no one fares worse than songwriters, and this has become a cause celebre for one indie rocker. In a recent blog post that went viral David Lowery, front man for the bands Camper Van Beethoven and Cracker, wrote: “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.” To back up his points Lowery posted a scanned royalty statement.

He was referring to his song, “Low,” which was a hit 20 years ago. It’s still played on classic rock stations and over the years he has received a nice chunk of change in royalties. Lowery, who has a degree in math and computer science from the University of California at Santa Cruz and has worked as a consultant on venture capital deals, decries the byzantine web of regulations that characterizes music licensing, with each format and distribution system functioning under a different set of rules.

“How we sell and license our songs has a layer of regulations like the airline industry in the 1960s,” he says.

For example, Pandora is classified as a “webcaster” while Spotify and Mog are music streaming services. Then you have terrestrial radio (like your classic rock FM station), satellite radio like Sirius, iTunes, Amazon and other digital download services, not to mention traditional compact discs. Each operates according to a different set of regulations.

On Pandora, every time a song that Lowery has written is “spun” or “played,” he receives .0000364 of a penny or about three one-hundred-thousandths of a cent. Lowery doesn’t do much better on Spotify, which calculates royalties as a share of revenue, so his take varies based on whether a tune he wrote is played as part of Spotify’s free- or paid service. On average, though, Lowery says that Spotify pays about .6 of a penny per spin for all of the rights. About half of that, or .3 of a penny, goes to the record label and he as performer receives .3 of a penny. A miniscule amount is funneled to him as songwriter.

With iTunes songwriters do much better. If a song that he penned sells for 99 cents, Apple skims 30% off the top while 70% goes to rights holders. Of that 70 cents, the record company grabs 50 cents, or 80% of the royalties. Meanwhile 15% flows to Lowery as a performer, so he gets 10.5 cents, and for his role as songwriter he’s paid an additional 9.1 cents.

Now, webcasting, which is the case for Pandora, and streaming for Spotify, isn’t quite the same as the per unit sales model of iTunes, but let’s say for the purposes of comparison that you play a song you bought from iTunes 20 times, which is, Lowery says, the average. That means he as songwriter receives about half a penny per spin. With terrestrial radio, it’s the songwriter who makes out best for each time his song airs. The performer isn’t paid at all. That’s because FM radio is viewed as promotional vehicle. Last quarter, Lowery told me, “Low,” spread out across a number of stations that averaged 3,000 listeners, brought in $1,300 for 18,700 plays – “pretty good for a 20-year-old song,” he says.

Because songwriters are getting hosed in most of the distribution models it’s led to an emphasis on bands covering tunes instead of bothering to write original music. After all, if no one writes the song, there's nothing to be performed.

“A lot of performers are covering Adele songs because there’s a financial incentive to be the performer and not be the songwriter,” Lowery says. “So you can capture the value as a performer rather than a songwriter.”

Even though in some ways it’s a great time to be a musician and songwriter, because there are no longer gatekeepers to prevent artists from creating and distributing their music, it’s also harder to earn a living. If you have a hit song, you can do pretty well on Pandora, Spotify and the rest. For most though, it’s an uphill battle, and the road is just getting steeper.

Lowery’s solution? He wants the government to get out of regulating music all together. “I want to end all of this compulsory licensing regulated rates,” he says. “If artists think their songs have value, they should have the opportunity to put their stuff on Pandora.

Because, you see, “Free music isn’t free. Pandora makes money off of it and Spotify says they’ll be profitable once it gets to 30 million users. Why shouldn’t the artists make money, too?”

Photo: Jason Thrasher