Streaming service Pandora just announced revenue of $1 billion for the 12 months ending June 2015, and it expects to generate between $1.175 billion and $1.185 billion for all of 2015. It is unclear at what point Pandora plans to begin adequately compensating the artists whose recordings make it possible to earn that revenue.
An article appearing in The Hollywood Reporter explains why US District Judge Louis Stanton decided that Pandora should pay 2.5% of its revenue to BMI. The decision came more than two years after publishers attempted to partially withdraw digital rights from BMI in order to get a raise from streaming outlets like Pandora. BMI argued the court for a 2.5% rate based on interim deals that were struck between the publishers and Pandora. In making the decision, Stanton considered Pandora’s $600 million 2014 revenue, and its stance that it hasn’t been profitable due to lack of success on the advertising. He also looked at what music services are paying—Apple 4.6% of revenue, Spotify (2.5%-6.25%) of label costs, and Rhapsody, just under 2.5%—though he admits “Pandora evades neat categorization.” BMI I was also given a “win” in that the license term will be four years, instead of five, to allow re-evaluation of the licensing relationship given the “rapidly changing nature of the online music industry.”
In February Pandora and BMI headed to court in a trial to determine how much Pandora will pay BMI songwriters and publishers. According to The New York Times, recent debates over music royalties with ASCAP and BMI have galvanized musicians and driven the Justice Department to review the regulatory agreements that govern BMI and ASCAP.
Pandora currently pays BMI 1.75% of its revenue, but it wants to reduce that fee to 1.7% to match what radio broadcasters pay for their streams. Pandora contends it is just another form of radio. BMI wants Pandora to raise its rate to 2.5%, arguing that Pandora is a more interactive form of media, and since it has no other programming like news or talk, it makes more extensive use of music than radio stations do.
Also in February, the US Copyright Office released its study, Copyright and the Music Marketplace, with recommendations on how existing music licensing laws should be updated to better reflect how people listen to music today. Among its recommendations were requiring radio stations to pay performance fees and the consolidation of rate-setting activities. Read the study at: copyright.gov/docs/musiclicensingstudy/.