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Despite Complaints About Streaming Costs, Artists Still Getting Very Little

1-28-2013

The New York Times is reporting that much like the CD when it first came out, Streaming music to consumers, is not very lucrative for artists. For example, on a 99-cent download, a typical artist earn about 7 to 10 cents after cuts are doled out to retailers, the record company and the songwriter. "One industry joke calls the flow of these royalties a “river of nickels.” In the CRS issue of Radio Ink, Big Machine Label CEO Scott Borchetta says it's also time for radio to give a little more back to artists. And, he has very little sympathy for Pandora's complaints about paying too much to operate its business.

Borchetta says over the last couple of years radio received a price break from BMI and ASCAP. "They gave radio a couple of points back. It's time to give those points to the artists, to the labels. They are no more important partners than we are. We are not even asking for more. We are saying, "What you have got on the table, share it. Bring it back." As far as Pandora, I didn't ask them to take my content and build a new business model with it. They chose that route, not me. If Pandora went away tomorrow, if they went out of business, it's not my fault. They chose that route." Borchetta's label is home to Taylor Swift, Tim McGraw and The Band Perry and other big name Country stars. 

The Times piece highlights Spotify, Pandora and other Internet music companies that "pay fractions of a cent to record companies and publishers each time a song is played, some portion of which goes to performers and songwriters as royalties. Unlike the royalties from a sale, these payments accrue every time a listener clicks on a song, year after year. Complicating the issue, each type of service pays different rates. Pandora’s are set by law. According to a number of music executives who have negotiated with Spotify, it generally pays 0.5 to 0.7 cent a stream (or $5,000 to $8,000 per million plays) for its paid tier, and as much as 90 percent less for its free tier."

The companies behind streaming are ballooning quickly, The Times writes. "Pandora, with 67 million regular users, is publicly traded, with a market capitalization of nearly $2 billion, and Spotify’s investors have reportedly valued the company at $3 billion. Yet so far they have contributed relatively little to the American recording industry’s $7 billion bottom line. In its last four reported quarters, Pandora paid $202 million in “content acquisition costs,” including licensing fees, and Spotify recently announced that it has paid $500 million in royalties since its inception. Downloads, by comparison, had $2.6 billion in sales in 2011, according to the Recording Industry Association of America."

Read the entire Times piece HERE
Subscribe to Radio Ink in time to receive our Country Radio Seminar issue highlighting the 25 Best Country PD's in America and our interview with Scott Borchetta.




(1/29/2013 7:39:50 PM)
Having read some of the comments, it seems some readers do not understand the difference between market capitalization and profit and loss. What is Pandora's market cap - somewhere around $2 billion. On the other hand annual revenues of around $300 million carry a performance fee of close to 60%. Add to that administrative fees, engineering expenses, etc. and there is no manner in which the company can make a profit. And some of readers think that Pandora should pay higher fees. Study accounting

- Bob Fox
(1/29/2013 10:16:12 AM)
@Robbie is correct i can tell you for a fact small market radio jobs WILL be lost. people like lanny simply don't care. just how much more money do artists need at the expense of working folks while they fly around on private airplanes doing cocaine lanny?

- TurnAboutIsFairPlay
(1/29/2013 10:02:21 AM)
It's time for a tough negotiator to step up for radio. It's the radio stations that should be receiving money for the advertising and promotion of the music. Yes, it's radio that made those artists and songwriters. Believe in radio or get another career.

- John
(1/29/2013 9:21:29 AM)
I laugh that this article says ZERO about Google/YouTube's catastrophic copyright infringement with the use of Mozilla Firefox'x VideoDownloadHelper to download every YouTube, Veoh, Vimeo, DailyMotion, ETC. files of both video and audio (with a background of a picture) from these sites behind all artists' and record company's backs (along with a Terms of Use that state it can be done), and then Google/YouTube lie in the Viacom case asserting no downloads take place.

Any complaints now artists?

- Ed Straker
(1/29/2013 7:53:39 AM)
Really Lanny? You also have starving midday jocks in smaller markets, and I guarantee they'll get cut before any increased royalties radio is forced to pay hit the bottom line.

- Robbie

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