The Pandora-Sony/ATV Deal: What It Means, Who Wins

The Nov. 4 agreement between the Internet radio service and the publishing giant begins the thawing process in a long cold war.

The licensing agreement between Sony/ATV Music Publishing and Pandora, announced Nov. 4, looks like a rare win-win for the music industry. Not only did the two sides bury the hatchet, both came away with things they wanted.  

In a letter to Sony/ATV songwriters, chairman/CEO Martin Bandier said the deal will result in "a significant increase" in royalties and will pay songwriters directly -- even if a publisher advance has not been recouped. Pandora was able to lock in rates ahead of possible increases in the near future, while improving its fraught relations with the world's largest music publisher.

Better relations could ease the way for Pandora’s international expansion: The service is currently available only in the United States (the sole territory covered by the Sony/ATV deal, a source tells Billboard), Australia and New Zealand. To operate outside the U.S., Pandora would need licenses from the very rights holders it has clashed with. As a kicker, the agreement gives Pandora the vague ability "to add new flexibility to the company’s product offering over time," although reps for both companies declined to elaborate. This flexibility could be anything from interactive capabilities -- though unlikely given their high cost -- to caching songs for offline listening.

While both sides decline to reveal what rate Pandora will pay songwriters, a look at some publicly revealed deals with other major publishers suggest that the service will pay Sony/ATV and its EMI-administered portfolios its pro rata share of 8.5 to 10 percent of revenue.

Whatever the number, the current deal is seen as a grudging step in the right direction for publishers that have long believed streaming services pay too little in royalties. David Israelite, president/CEO of the National Music Publishers Association, considers it an improvement, although, he adds, "it is far short of the ultimate goal of songwriters and music publishers being paid a free market rate along with the right to make decisions about the use of their intellectual property."

It's easy to assign too much value to the Sony/ATV-Pandora deal. But last week's agreement could be the best sign yet that the music industry's longest Cold War might be coming to an end.  

A version of this article first appeared in the Nov. 21 issue of Billboard.