"We love Bette’s music and certainly respect her advocacy for fair compensation for artists," a Pandora spokesperson said in response to this story. "But we must clarify an important fact: Pandora paid more than $6,400 for those 4+ million plays, based on our 2014 rates which are published publicly. In terms of compensation to the creative community Pandora remains by far the highest paying form of radio. Pandora pays songwriters a greater percentage of revenue than terrestrial radio. And Pandora paid 48% of our revenue in performance royalties to rights-holders in 2013 – more than $300 million – while terrestrial radio was required to pay nothing."
Over the last year, however, a rising chorus of musicians have spoken out against what they see as music streaming services' inadequate royalty payments, which includes Radiohead's Thom Yorke, Atoms for Peace's Nigel Godrich, David Byrne and, most recently, Steven Tyler.
Tyler was in Washington D.C. on March 25 for the National Music Publishers Association's "Celebration of the American Songwriter" event which also honored Senator Chuck Grassley. According to National Journal, the Aerosmith frontman expressed his disdain for current digital royalty rates: "If the laws continue going the way they are," he said, "[songwriters] will never be paid fairly for [their] own participation. So people, forgive me for being a little jaded about the state of copyright."
Last week, too, Grammys president and CEO Neil Portnow wrote an op-ed in Roll Call calling for legislation to address copyright issues which was timed to the organization's annual Grammys on the Hill event. Here he outlined the MusicBus initiative which he summed up as a “Fair market pay to all music creators across all platforms.” The music industry organization plans this year to extend its political outreach with a “Grammys in my district” day in which 22,000 members of The Recording Academy will be encouraged to "bring music to their legislators’ local offices and make the case for fairness for music creators."
All this comes in the wake of a recent court battle between Pandora and ASCAP in which a federal rate court essentially maintained the status quo upholding the amount the digital radio service pays the performance rights organization. Sony/ATV Publishing CEO Martin Bandier called the decision "a clear defeat for songwriters" and "woefully inadequate."
Pandora has actively complained about and sought to change what it sees as onerous royalty payments—especially in comparison to what terrestrial radio pays out. There are signs, however, that the digital radio service's business model is starting to scale. For the fiscal year, Pandora posted revenues of $638.9 million, up 56% from 2012 and paid out $342.9 million in music licensing royalties, roughly 53.8% of its total revenue. That ratio is an improvement over 2012, when Pandora spent 60.6% of its revenue on licensing costs. The company, however, also posted a larger annual loss due to higher costs. Pandora lost $40.7 million in the 12 months ended Dec. 31, compared with a $35.6 million loss in 2012.
None of which has helped assuage the financial difficulties many musicians face. In late March an artist named Armen Chakmakian posted his quarterly earnings statement online igniting a discussion on the fairness of digital streaming rates. Chakmakian received $4.20 in total royalties from twelve digital music companies (including .33 cents from Pandora and .76 cents from Spotify). Finally, the paltry amounts led the musician to conclude: "Business practices like this are one of the reasons I jumped ship and only write for television now."
*This story was correction appended following its initial publication: Neil Portnow is president/CEO of the Grammys not the RIAA; and Steven Tyler spoke at the National Music Publishers Association's event not a Grammys on the Hill event.