David Lowery, of bands like Cracker and Camper Van Beethoven, is an outspoken critic of Pandora and other services that use so-called compulsory licenses to broadcast music over the Internet.
The idea of compulsory licenses is set out in U.S. copyright law, and it basically allows Pandora and similar services to stream just about any song they want so long as they pay a fixed royalty on each song. Pandora has argued that it is losing money because these royalties are too high, while songwriters like Lowery say they are only making a pittance from the royalties.
In an effort to demonstrate his side of the argument, Lowery has revealed his recent royalty payments for the 1994 Cracker hit “Low.”
Records show that in the last quarter, the song was streamed around 1.16 million times on Pandora, for which the band splits $42.25 in songwriting royalties. Lowery’s share is $16.89. So he earned about $.000015 per play of the song on Pandora.
He compares this to his royalties from satellite radio company Sirius XM, where “Low” was only played 179 times but earned him $182, a little more than $1 per play.
Then there’s good ol’ fashioned radio, on which the song was played around 18,800 times, and for which he was paid $1,373, or about $.07 per play.
Of course, comparing all of these figures isn’t easy. A million streams on Pandora is a lot of plays, but that would be like counting every radio tuned in to Sirius as a single play-through of the song. This is why satellite and traditional radio often pay higher royalties, because a single play on a high-rated radio show can reach millions of listeners.
These companies can usually pay more because they’re bringing in significantly more revenue than Pandora, which runs ads infrequently. Sirius runs ads and charges subscription fees. Pandora offers a subscription tier, but that gets rid of the already meager ads.
Lowery maintains that it’s not the artists’ fault that Pandora isn’t raking in profits, especially since artists have no say in whether their music is allowed on the service or how much they receive in royalties:
Here’s an idea. Why doesn’t Pandora get off the couch and get an actual business model instead of asking for a handout from congress and artists? For instance: Right now Pandora plays one minute of commercials an hour on their free service. Here’s an idea! Play two minutes of commercials and double your revenue!
Anyone who has worked in an ad-supported business knows that this isn’t as simple as it sounds. Ad buyers like sure bets and built-in audiences. This is why drive-time radio has historically been so successful in terms of ratings and ad revenue.
Meanwhile, people who use Pandora choose to do so because they want to avoid the usual trappings of broadcast radio — chatty DJs, lack of control over song selection, and most of all the near-constant ad breaks.
In order to make more money, Pandora will either need to get lawmakers to lower the statutory royalty they pay, or start finding new sources of revenue, whether that’s more advertising or a move to a more attractive subscription model remains to be seen.
The effect of Google and Apple’s entry into the streaming music market remains to be seen. Google’s premium service charges monthly subscription but includes direct access to a growing library of streaming titles. It’s like Netflix for your ears. Apple’s service will be closer to Pandora’s, but it’s believed that the company is negotiating royalties with the major labels rather than going the compulsory license route.