News about Pandora seemed to explode this week as several artists wrote high-profile pieces expressing their dissatisfaction with the internet radio company's royalty rates as well as the company's attempts to lobby for what appear to be even lower rates.
On Sunday, members of Pink Floyd penned a well-annotated op-ed in USA Todayand on Monday, David Lowery (from Cracker) posted statements showing that he makes less from Pandora than from a t-shirt sale. These two pieces are in addition to the recent and well-publicized email exchange between Blake Morgan and Pandora founder Tim Westergren. On Wednesday, Westergren responded with a lengthy blog post.
While I think that the conversation that is starting to happen is very important for the entire streaming business, it represents the opening of a Pandora's box for Westergren. Over the past couple of months, Pandora's attempts to advocate for lower rates have increased, and with them, so has publicity about their efforts. For Pandora, what began with a letter inviting artists to have a conversation about the rates, has now backfired as these high-profile artists turn against them. Also, Pandoa's purchase of a terrestrial radio station in an attempt to become eligible for the lower rates paid by terrestrial broadcasters smacks of avoiding the conversation altogether.
There should be no mystery about my feelings toward streaming music services. While I'm not satisfied with the absolute value of current payouts to artists, I consider these services to be terrestrial radio replacements. As such, I would argue that the payouts are in line with the audience. (Or at the very least, we should be more clear about what each of these revenue streams represents in terms of audience and therefore potential revenue.) All of that said, I'm an optimist here—this is a new market, and a growing one—so my expectation is that these amounts will grow in the future.
Streaming music represents a new model that needs to be nurtured, if not wholly embraced. Consumers are less and less satisfied with a music consumption model based upon ownership. The tide is turning toward one of access. Streaming represents the future, and the money will come as listeners become more accustomed to the idea of streaming and sign up for particular services they like.
In may ways, opening Pandora's box could actually be the tipping point in the conversation about streaming royalty rates specifically—and public performance rates in general. While no terrestrial public performance rate for sound recordings even exists, the other rates form a confusing jumble that no longer makes sense for the music industry. Starting this conversation will go a long way toward fixing that. What might be bad for Pandora may actually be good for the industry as a whole.