Pandora's Latest Direct Deal Is with Downtown Music Publishing

The deal covers the songwriting catalogs of Bruce Springsteen, John Lennon, Ray Davies and others.

Pandora has reached a multi-year agreement with Downtown Music Publishing, the fourth licensing deal with a music publisher in the last six weeks and the second with an independent publisher. Not only does the deal show a difference approach to licensing, it reveals further change in Pandora's relationships in the music business.

Last month's deal with Sony/ATV Music Publishing was followed this month by deals with SONGS Music Publishing and Warner/Chappell Music Publishing. In all, Pandora has deals with publishers that accounted for a 46 percent publisher share of the top 100 radio songs in the third quarter. It's a remarkable change in business approach after years of sparring with music publishers in rate court about performance royalties and in Washington D.C. about Pandora's purchase of a South Dakota radio station in a play for the lower royalties paid by terrestrial broadcasters.

Downtown has provided administration and creative services since its founding in 2007. It represents the likes of Bruce Springsteen, John Lennon, Imogen Heap, Santogold, Hans Zimmer, Old Crow Medicine Show, Mos Def and Ray Davies. It acquired London-based publisher Eagle-i-Music in May in a deal that included its neighboring rights and production library businesses.

The agreement and the two companies' statements followed the messaging of the previous three deals. The deal creates business benefits for Pandora while "modernizing compensation" for Downtown and its songwriters in the United States. Music publishers have historically been paid through Pandora's licenses with performing rights organizations such as ASCAP and BMI. Direct deals give Pandora better rate certainty as it plans the launch of an on-demand service and international expansion.

Downtown receives better compensation than it would through Pandora's licensing deals with performing rights organizations. Publishers have long complained about royalties from Internet radio and the roughly 12-to-1 difference between Pandora's royalties for sound recordings owned by record labels versus musical works represented by publishers. These direct deals may not improve on that ratio because Pandora will pay more for sound recording royalties in 2016. Nevertheless, publishers fare better with direct deals, terms of which are not disclosed.

The announcement comes the week after the Copyright Royalty Board set royalty rates Pandora and other webcasters will pay for the performance of sound recordings. That announcement gave Pandora greater certainty about its content costs for the next five years. The rate for ad-supported streams will increase to $0.0017 from $0.0014 while subscription rates will drop to $0.0017 $0.0024. Future rate increases will be tied to changes in the Consumer Price Index.