Get the Facts: Pandora Buys FM Radio Station in Bid to Undercut Songwriters
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May 29, 2015

Get the Facts: Pandora Buys FM Radio Station in Bid to Undercut Songwriters

UPDATE 5/29/15


Pandora recently purchased radio station KXMZ-FM in Rapid City, South Dakota, in a bid to lower the licensing fees it pays songwriters and composers for public performances of their work. Pandora says this will help music creators and listeners, but the facts tell a much different story.

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SONGWRITERS DRIVE HUGE REVENUES FOR PANDORA:

  • Pandora, a Wall Street-traded company, reported revenues of more than $920 million in FY2014 alone. (1)
  • In contrast, ASCAP is a membership organization that operates on a not-for-profit basis to collect and distribute royalties to the more than 540,000 independent songwriters, composers and music publishers it represents. (2)
  • Every 1,000 plays of a song on Pandora is worth about 9 cents in performance rights for its songwriters, composers and publishers ($0.00009 per stream). (3)
  • To put that in context, Miranda Lambert’s hit song “The House that Built Me” was streamed on Pandora nearly 22 million times, earning its songwriters and publishers roughly $1,788.48. Co-writer Allen Shamblin received only $894.14. Lady Antebellum’s 2011 Grammy-winning Song of the Year “Need You Now” was streamed nearly 72 million times on Pandora, earning its four songwriters and publishers $5,918.28. Co-writer Josh Kear received only $1,479.57. (4)
  • In 2014, Pandora paid all songwriters only about $36 million in total royalties, representing a mere 4% of the company’s revenue. (5)

PANDORA USES MORE MUSIC THAN TRADITIONAL RADIO:

  • Internet radio and traditional AM/FM radio use music and generate revenue in very different ways.
  • Over 80 million people listen to Pandora. In contrast, KXMZ has an average listenership of 18,000. (6)
  • The Radio Music Licensing Committee (RMLC) license was designed for businesses that earn more than 95% of revenue from traditional AM/FM radio. That’s a far cry from Pandora’s business model, which is wall-to-wall, user-influenced online music.
  • By 10am every morning, Pandora has already performed 200 million songs, as compared to the hundreds of songs played by the average radio station in an entire day. (7)
  • Even with the purchase of KXMZ, Pandora will earn virtually all its revenue from the Internet, so the Internet licensing rate should apply.
  1. Pandora’s Q4 and full year 2014 financial results 
  2. ASCAP.com
  3. ASCAP Internal data
  4. Member royalty statements
  5. Pandora’s Q4 and full year 2014 financial results. This number is based on $906.6 million of non-GAAP total revenue for the 12 months ending December 31, 2014
  6. Pandora’s Q4 and full year 2014 financial results
  7. Pandora is Now 200 Million Music Fans Strong” Pandora Investor Relations Release, 4/9/13


WHAT PEOPLE ARE SAYING:


It’s telling that the deal was announced in an editorial written by Christopher Harrison, Pandora’s assistant general counsel, in the Hill, a Washington newspaper covering legislative minutiae. Pandora’s future relies more on laws and courts than on its ability to successfully run KXMZ, Hits 102.7.
Businessweek: Pandora Buys a Radio Station, Just to Make a Point About Royalties, June 12, 2013

Just in case you didn’t quite get it before, Pandora has now demonstrated unequivocally that they loathe songwriters so much that they’d literally do anything to screw them. Including antics like buying an FM radio station.
Music Tech Policy by Chris Castle:Tim Westergren’s Mask Is Slipping: Pandora’s Scorched Earth Attack on Songwriters, June 11, 2013

There may be plenty of music-lovers in the nation’s 46th largest state, but Pandora’s purchase of a South Dakota top 40 music station last week certainly wasn’t about them.
Upstart Business Journal: Pandora’s bold plunge into mainstream radio, and a lesson for startups, June 12, 2013

The company is also trying to convince everyone that this about “the community” and not just pleasing their money-hungry investors… Despite its stated intentions to make its service better and please “the community,” it also seems like Pandora bought a radio station in South Dakota as a big publicity stunt in an attempt to highlight its plight with the record industry which is still stubbornly trying to make money for its artists.
Gizmodo: Why Pandora Just Bought an FM Radio Station in South Dakota, June 12, 2013

“…the FCC has sent Pandora letter, according to an ASCAP filing with the rate court, that says that Pandora hasn't adequately complied with supplying the agency with ownership information so it can determine if Pandora is at least 75% owned by U.S. citizens, which means foreign ownership must be capped at 25%.”
Billboard: FCC Shelves Pandora's Bid For South Dakota Radio Station, January 15, 2014

 

Its first foray into traditional radio broadcasting, the move has little to do with strategic shift and everything to do with royalty costs… Pandora’s costs savings will be small. The preferential royalty rates are expected to snag savings worth less than 1 percent of its revenue versus the rates it is currently paying.
CNET: Pandora to buy radio station to piggyback onto cheaper costs, June 11, 2013

Members like me depend on ASCAP to negotiate fair deals on our behalf, so we can earn a living as more listeners discover and enjoy our music across a wide variety of platforms, including Internet radio… I like streaming music online as much as the next guy. And I certainly appreciate the opportunities it creates for me as an artist to reach new listeners. But Pandora is misleading readers by claiming to be on the side of artists, when its recent actions firmly prove otherwise. Shame on us if we let them continue the charade.
The Hill: Pandora is stiffing artists by songwriter Josh Kear, June 13, 2013

“This is yet another sad step in Pandora’s war against songwriters,” National Music Publishers Association president David Israelite told Digital Music News. “While other digital music partners choose to enter into voluntary licensing deals, Pandora chooses to try to enrich itself through a strategy of suing creators and gimmicks. The only positive development from this is that Pandora has removed any shred of credibility it had with creators and now can be seen for what it is — a company with no interest in treating songwriters fairly.” Digital Music News: Songwriters Respond: “This Is Another Sad Step in Pandora’s War Against Us...”, June 12, 2013

“In a setback to its music licensing plans, Pandora has received word from the FCC that for the time being it is no longer processing its application to transfer ownership of the broadcasting license for KXMZ, the Rapid City, South Dakota radio station it acquired last June. Pandora had hoped to take advantage of the lower rates that internet streaming services owned by terrestrial radio stations enjoy.”
The Trichordist: FCC Shelves Pandora’s Bid For South Dakota Radio Station | Billboard, January 20, 2014

In the digital age, hard work still deserves fair pay. As new technologies create new opportunities for musicians to reach new audiences, ASCAP is committed to making sure the hundreds of thousands of small and independent songwriters, composers and music publishers we represent are fairly compensated for public performances of their work.