The Messy Situation Within the Music Industry in Regards to Pandora

Hello everyone,

Upon reviewing the listed articles, a conclusion has been come to. The Music Industry is a rough road to travel. The system of Royalty dispersion system is convoluted and saturated with unfair percentages. This goes to show that everyone has to get their hand in the pot. If someone doesn't like how much they can grab from the pot, they gripe and moan.

The pyramid involved within the Royalty system is too big. Before an artist can see any of their profits, the Record Company, Publisher, and administrators have to get their cut. Understanding why they get a cut of the profit, the system is way too complicated and too large.

The percentages are unfair, because the companies are making a significant profit off of their artists through Royalties. An artist, as a single entity, works for a company, which employs many other single entities. Depending on the success of the artists, the company makes a collective profit. Publisher's like BMI, have thousands of artists they represent. Record Labels may only have a hundred of so artist they have signed. Depending on the administrator, the amount of artists circumnavigating their figures, profits could vary.

Let's take Pandora's rates in 2013 into consideration.

Example:
- 2,000,000 plays at $0.0011 per play = $2200.00

- ASCAP/BMI at 1% = $22.00
- SoundExchange at 5% = $110.00
- Record Label at 44% = $968.00
- Publisher at 3% = $66.00

- Songwriters at 3% = $66.00
- Performer/Session at 44% = $968.00


Let's say there are 100 of these artists who had 2,000,000 plays under the same circumstances/companies:

Example:
- 200,000,000 plays at $0.0011 per play = $220,000.00

- ASCAP/BMI at 1% = $2,200.00
- SoundExchange at 5% = $11,000.00
- Record Label at 44% = $96,800.00
- Publisher at 3% = $6,600.00

- Songwriters (DIVIDED BY 100 ARTISTS) at 3% = $66.00
- Performer/Session (DIVIDED BY 100 ARTISTS) at 44% = $968.00

The percentages tell a different story when analyzing multiple artist collectively. The Record Label looks to be making out like a bandit. The figures should be changed and less hands digging into the proverbial pot.

Here is a proposition.

Example:
- 200,000,000 plays at $0.0011 per play = $220,000.00

- ASCAP/BMI at 0.5% = $1,100.00
- SoundExchange at 2% = $4,400.00
- Record Label at 20% = $44,000.00
- Publisher at 2.5% = $5,500.00

- Songwriters (DIVIDED BY 100 ARTISTS) at 20% = $440.00
- Performer/Session (DIVIDED BY 100 ARTISTS) at 55% = $1,210.00

In theory, this looks more acceptable, as far as profits are concerned. The Record Label's percentage is dropped from 44% to 20%, and the Songwriter get's boosted to 20%. It only seems fair if the songwriter get's a bigger cut, because without the songwriter, who was going to write the hit in the first place?

After the proposed change in percentages, let's look at the numbers with only one artist again, but with the new percentages.

Example:
- 2,000,000 plays at $0.0011 per play = $2,200.00

- ASCAP/BMI at 0.5% = $11.00
- SoundExchange at 2% = $44.00
- Record Label at 20% = $440.00
- Publisher at 2.5% = $55.00

- Songwriters at 20% = $440.00
- Performer/Session at 55% = $1,210.00

The figures above only constitute what profits could be gathered from Pandora. This does not include other Online Streaming services and distribution methods. Pandora alone, would not be able to supply efficient income for an artist to live off of. There would still need to be additional sources of income from other media distribution methods in order to make an artist's life livable.

With organizations like the RIAA trying to manufacture a crisis, it leaves less confidence in today's music industry. There seems to be more of an aim to protect the interests of the Record Labels than the Musicians/Artists. With artists boycotting certain internet music streaming services, all they are doing is promoting higher rates per play going to Record Labels, publishers, and management. The small amount of change in rates per play will not affect the artists income levels much. For there to be a significant change, the percentages have to be changed.

The markets are changing slowly towards internet music streaming being the more favorable option. iTunes may be selling music for $0.99 a song, but Pandora, for instance, cost nothing and is easily accessible. It's like putting all those songs from iTunes on Shuffle. More people are realizing the benefits of Pandora and are more keen on listening to music through that service than purchasing it. Companies are seeing this and they want the biggest possible slice of the pie.

It would probably be a good time to cut the pie differently so artists and songwriters can benefit the way they should. It doesn't make sense for an artist to jump into his/her passion for virtually no money.


Sincerely,

Alexander C. Torri



Sources:
Westergren, T. (2013, June 26). Pandora and Royalties. In Pandora Blog. Retrieved April 15, 2014 from http://blog.pandora.com/2013/06/26/pandora-and-royalties

Fusilli, J. (2013, July 14). Thom Yorke and Atoms for Peace Boycott Spotify. In The Wall Street Journal. Retrieved April 15, 2014 from http://blogs.wsj.com/speakeasy/2013/07/14/thom-yorke-and-atoms-for-peace-boycott-spotify

Degusta, M. (2013, June 25). Pandora Paid Over $1,300 for 1 Million Plays, Not $16.89. In the understatement. Retrieved April 15, 2014 from http://theunderstatement.com/post/53867665082/pandora-pays-far-more-than-16-dollars

Dickey, Megan R. (2014, March 19). It Looks Like Pandora Has Actually Stolen Business From iTunes. In Business Insider. Retrieved April 16, 2014 from http://www.businessinsider.com/pandora-v-itunes-revenues-2014-3