Like many in the music biz, David Israelite was surprised to learn of Roger Faxon's decision to join the board of directors at Pandora. In this open letter exclusively published by Billboard, Israelite shares his thoughts on how it might all pan out for the veteran music publisher in his new relationship with the digital music service. Israelite is the president and CEO of the National Music Publishers’ Association (NMPA). Founded in 1917, NMPA is the trade association representing all American music publishers and their songwriting partners.
I was surprised to read in Billboard that Roger Faxon -- a former music publisher and friend -- has agreed to join the Pandora board of directors. This was shocking because Mr. Faxon knows all too well that Pandora has been waging war against the same songwriters he used to represent. The digital giant is doing everything in its power to reduce even further what little it pays to songwriters through a strategy of lawsuits, aggressive lobbying, and even legal gimmicks.
Perhaps adding a veteran of the music industry like Mr. Faxon to its board signals that Pandora wants to improve its relationship with the music industry. But if Pandora is truly interested in improving its relationship with songwriters, it needs to address some basic questions:
First, does Pandora sincerely believe that paying approximately only 4% of its revenue to songwriters and music publishers is a fair value for the creative content that drives its business? Other digital music services pay significantly more. It seems unfair that Pandora pays itself 11 times more simply to deliver content than it pays to the people who create the content.
And while entrepreneurs should reap the rewards of their successful businesses, shouldn’t there be some relation between the financial success of the owners of Pandora and the songwriters who make the music? Doesn’t it suggest that something is out of proportion when in 2013 one of Pandora’s founders cashed out more in personal stock options than Pandora paid all songwriters combined?
Recently, when asked by songwriter Rodney Jerkins to justify that 4% at a music conference, Pandora co-founder Tim Westergren answered, “So, 4 percent of revenue goes to the publisher, the composer, about 50 percent goes to the performer, that’s the way the law is set up right now.” Yet what Mr. Westergren failed to mention is that Pandora is fighting to make that law even worse, and has filed multiple lawsuits to cut that 4% even further.
If Pandora believes it is driving incremental revenue that can provide a solution to songwriters in this new digital music streaming world, as Mr. Faxon suggests, then why did Pandora file a lawsuit against performing rights organization (PRO) ASCAP last year to lower even further the already embarrassingly small amount it pays ASCAP songwriters?
And why is Pandora making every effort to cut the rates it pays to another PRO, BMI, in a lawsuit currently pending? Does Pandora believe that creators of music can make a decent living while it continuously seeks to lower the already small amount it pays them?
Finally, let’s not forget, Pandora isn’t just using the courts to try to pay songwriters less, they are looking for more creative ways to exploit them. Currently Pandora is attempting to buy a very small radio station in South Dakota in a cynical ploy to try to argue that the entire company should pay even lower rates as a “broadcaster.” Does Pandora really believe that this is an honest attempt to expand the company into terrestrial radio, or the truth: a gimmick to achieve a classification where they can further decrease the amount paid to songwriters?
Ultimately, songwriters are not alone in being targeted by Pandora. The streaming giant is an equal-opportunity offender and has also refused to pay royalties to recording artists who released music before 1972. Again, trying to take advantage of a legal loophole to pay nothing to the artists who need it the most.
To date, songwriters have not seen Pandora as a solution and collaborator in the digital frontier, but instead a company looking to fight songwriters at every turn to benefit its bottom line. It’s my hope that Mr. Faxon can bring some sense to Pandora’s approach, but unfortunately I doubt they will listen to him. The pleas of thousands of struggling creators have not been enough.