Pandora and Warner/Chappell Sign Direct Licensing Deal

Andrew Harrer/Bloomberg via Getty Images
The Pandora Media Inc. logo is seen on an Apple Inc. iPhone displayed for a photograph in Washington, D.C. on Sept. 17, 2013. 

Pandora has cut a multi-year direct publishing deal with Warner/Chappell Music, making it the final of the three major music publishers to sign a direct deal with the web radio giant.

The deal allows Warner/Chappell Music to deliver improved performance royalties for its songwriters, while Pandora will benefit from greater rate certainty and the ability to add new flexibility to the company's product over time, according to the announcement. Those are expected to include greater customization features -- say more skips per song by the listener, and more pauses, than currently allowed. Beyond that, Pandora’s expansion beyond the U.S. and Australia and New Zealand markets were most likely a major factor during negotiations.

Terms of the deal were not revealed. Some industry sources suggest that the agreements, both between Warner/Chappell Music and another recently announced with Sony/ATV, will see Pandora paying each publisher their pro-rata share ranging between 10 percent of revenue, the amount that iTunes Radio agreed to pay music publishers; and the 8.5 percent of revenue, the same amount Pandora agreed to pay with Universal Music Publishing Group during the BMI rate trial. The UMPG direct deal is just for BMI songs; Pandora still needs to get licensed with UMPG for ASCAP, as that PRO's blanket license expires at the end of this year.

“It is Warner/Chappell’s top priority to make sure our songwriters are prospering both creatively and commercially, and that the value of their music is properly recognized,” Warner/Chappell Music CEO John Platt said in a statement. “We look forward to seeing our songwriters benefit from this new agreement with Pandora.”

“Pandora is proud to be part of their tradition of maximizing the value of music publishing and talent," said Pandora CEO Brian McAndrews in a statement.

Pandora clearly plans to expand globally. In order to do so it needs two things: an easy way to get into new countries, and direct licensing deals with music publishers since the compulsory license model of the U.S. isn’t available elsewhere. Its recent announced plans to acquire the assets of Rdio helps the first order of business, as it is already in about 80 countries around the world. But in order to cut deals in those countries, the major publishers likely would have demanded that the U.S. market be on the table for any direct deals, effectively ending its use of the compulsory license in the U.S. Finally, the deal is in line with Pandora’s efforts to present a friendlier face to songwriters, publishers and artists and labels.

While Pandora’s publishing payouts will be going up, record labels and artists are on the edge of their seats ahead of the rate determination announcement the Copyright Royalty Board will make, which is expected to come down tomorrow.