The Pandora – Naxos Deal: Fairness for Professional Musicians?

May 1, 2015

Ray Hair  -  AFM International President

Below is an opinion article I authored in response to a recent deal between Naxos and Pandora, which apparently bypasses direct payment to members of performance rights royalties for digital radio through SoundExchange and via the AFM and SAG-AFTRA Fund. Digital royalties from webcasters like Pandora have been growing quickly. Unfortunately, US law also allows record labels to cut direct deals outside of SoundExchange. The new performance rights bill introduced by US Representatives Jerrold Nadler (D-NY) and Marsha Blackburn (R-TN) would ensure that statutory performance royalties are paid to performers.

In the meantime, musicians who recorded with the following orchestras, whose managements have deals with Naxos, may see a significant drop in royalty payments: Ann Arbor, Alabama, Atlanta, Baltimore, Boston, Boston Pops, Buffalo, Chicago Sinfonietta, Chicago, Detroit, Elgin, Grand Rapids, Grant Park, Hollywood Bowl, Honolulu, Houston, Little Orchestra Society, LA Chamber, LA Opera, LA Philharmonic, Minnesota, Nashville, NY Philharmonic, North Carolina, Oregon, Pacific, Philadelphia, Pittsburgh, Puerto Rico, Rochester, San Antonio, Santa Barbara, San Diego, San Francisco, San Francisco Opera, St. Louis, and Utah.

Members of the American Federation of Musicians continue to be deeply concerned about greed and profiteering in the music industry at the expense of those who create music. Professional musicians deserve to be treated better. We make all the music, but it seems like everyone else makes all the money.

We are alarmed by the agreement recently reached between Pandora and Naxos (the world’s leading classical music label), on a multi-year US license for the entire Naxos catalog. We were concerned when their joint announcement was notably silent on any mention of fair and direct payment of royalties to artists.

As AFM members who record classical music are keenly aware, professional musicians receive royalties directly and immediately, via SoundExchange, when Pandora uses the statutory license. Pandora has repeatedly and publicly boasted about the supposed benefit it provides to artists, including in their sworn testimony to the House Judiciary Subcommittee, just a few months ago. They praised the statutory licensing process as an efficient, transparent solution that “must be preserved,” and specifically applauded the fact that the statutory license ensures that artists and musicians “actually receive their fair share of the hundreds of millions of dollars in royalties that services like Pandora pay each year.”

Indeed, direct pay to artists and musicians was supposedly a significant part of Pandora’s agreement with Merlin, an independent consortium of record labels—there was an entire paragraph in the Billboard article on the agreement (http://www.billboard.com/articles/business/6207058/pandora-label-deal-merlin) and the fact that artists would still be paid directly, even if they were on a label subject to that agreement. But nothing in the Naxos announcement mentions anything about SoundExchange administering payment to the artists.

Under the law, 50% of performance royalties are paid to featured artists, session musicians, and background singers. The other 50% of the performance royalties are paid to the owner of the sound recording (i.e., the owner of the “master”), which can be a record label or an artist who owns their own masters. So when it comes to orchestral/classical recordings, the revenue at stake in the Pandora/Naxos deal affects a far greater number of musicians than what flows from traditional artist recordings, featuring a solo artist or a group.

That’s why we ask: Where is the commitment from Pandora and Naxos to compensate the artists and musicians who performed the music in the Naxos library? Have Pandora and Naxos decided to dump the statutory license to hide the ball and cheat hard-working artists and musicians out of royalties they’ve rightfully earned?

If so, it appears that Pandora and Naxos want the benefit of a statutory model only when it suits them—except when they can make an extra buck at the expense of those who actually make the music.

If Pandora and Naxos executives want to ensure that musicians receive their fair share of payments, they should require that any direct deals be contingent on labels agreeing that SoundExchange will continue to administer the artist payments according to the statutory process.

Unfortunately, this is just the latest example of exploitation of artists and musicians that Congress and the AFM seek to prevent. When labels and music services deliberately avoid the statutory license, they erode the value of every artist. These dark deals hurt the very people who perform the music that Pandora’s business depends on. These are hardly the actions of an industry partner seeking to earn the trust and support of hard-working musicians. It sounds more like the same old song, second verse.

Professional musicians and our industry deserve better.

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