Guest Post: Is Pandora's Licensing Deal With Classical Label Naxos Unfair to Professional Artists?

Andrew Harrer/Bloomberg via Getty Images
The Pandora Media Inc. logo shown on an iPhone in 2013. 

Members of the American Federation of Musicians ("AFM") continue to be deeply concerned about greed and profiteering in the music industry, at the expense of those who create music. Professional musicians deserve to be treated better. We make all the music, but it seems like everyone else makes all the money. 

We are alarmed by the agreement recently reached between Pandora and Naxos, the world’s leading classical music label, on a multi-year US license for the entire Naxos catalog. We were concerned when their joint announcement was notably silent on any mention of fair and direct payment of royalties to artists. As AFM members who record classical music are keenly aware, professional musicians receive royalties directly and immediately when Pandora uses the statutory license. Pandora has repeatedly and publicly boasted about the supposed benefit it provides to artists, including in their sworn testimony to the House Judiciary Subcommittee, just a few months ago. They praised the statutory licensing process as an efficient, transparent solution that "must be preserved," and specifically applauded the fact that the statutory license ensures that artists and musicians "actually receive their fair share of the hundreds of millions of dollars in royalties that services like Pandora pay each year." 

Pandora and BMI Wrap Up Arguments, Await a Big Decision

Indeed, direct pay to artists and musicians was supposedly a significant part of Pandora’s agreement with Merlin, an independent consortium of record labels -- there was an entire paragraph in the Billboard article on the agreement about the fact that artists would still be paid directly, even if they were on a label subject to that agreement. But nothing in the Naxos announcement mentions anything about SoundExchange administering payment to the artists. 

Under the law, 50 percent of performance royalties are paid to featured artists, session musicians and background singers. The other 50 percent of the performance royalties are paid to the owner of the sound recording (i.e., the owner of the "master"), which can be a record label or an artist who owns their own masters. So when it comes to orchestral/classical recordings, the revenue at stake in the Pandora/Naxos deal affects a far greater number of musicians than what flows from traditional artist recordings, featuring a solo artist or a group.

That’s why we ask: Where is the commitment from Pandora and Naxos to compensate the artists and musicians who performed the music in the Naxos library? Have Pandora and Naxos decided to dump the statutory license to hide the ball and cheat hardworking artists and musicians out of royalties they’ve rightfully earned?

If so, it appears that Pandora and Naxos want the benefit of a statutory model only when it suits them -- except when they can make an extra buck at the expense of those who actually make the music.

Less Could Mean More: Why Merlin's Deal With Pandora May Pay Off

If Pandora and Naxos executives want to ensure that musicians receive their fair share of payments, they should require that any direct deals be contingent on labels agreeing that SoundExchange will continue to administer the artist payments according to the statutory process.

Unfortunately, this is just the latest example of exploitation toward artists and musicians that Congress and AFM seek to prevent. When labels and music services deliberately avoid the statutory license, they erode the value of every artist. These dark deals hurt the very people who perform the music that Pandora’s business depends on. 

These are hardly the actions of an industry partner seeking to earn the trust and support of hard working musicians. It sounds more like the same old song, second verse.

Professional musicians and our industry deserve better.

Ray Hair is president of the American Federation of Musicians.

Billboard welcomes responsible commentary -- please submit op-ed and guest post concepts to andrew.flanagan@billboard.com.