Rapid City, SD: Pandora’s New Radio Station

Image representing Pandora Media as depicted i...
Image via CrunchBase

The big news in online music streaming this summer is that Pandora, the Internet’s most popular radio service, has purchased a radio station. In the town of Rapid City, South Dakota, Pandora has set up its first and only land-based station, not in an attempt to pursue traditional broadcasting, but in a campaign to reduce the royalties it pays to musicians. While its actions spark strong opposition and ill feelings in the music community, Pandora’s efforts can be seen as an important event in the struggle for songwriters to get paid in the face of free music.

Last year Pandora lobbied aggressively for a bill it created to lower the rates it pays to the composers of the songs it streams. Though the “Internet Radio Fairness Act” died in a congressional committee, Pandora has continued to assert its efforts to distribute less in royalties.

Pandora is amidst disputes in court with Performance Rights Organizations (PRO’s monitor public performance royalties on the behalf of musicians) including BMI and ASCAP. Pandora’s main claim is that it wants to “operate at parity” with its largest competitor, Apple’s iHeart Radio. Because iHeart Radio is owned by Clear Channel, the parent company of a network of terrestrial (traditional, non-Internet) radio stations, it is entitled to the same royalty pay program as terrestrial stations, which amounts to less per play than that paid by the Internet-based streamers. Pandora’s complaint is that if the internet-based iHeart Radio pays the same as a terrestrial stations, Pandora should be privy to those rates as well.

Songwriters, artists, and their representative organizations are upset because of the meager earnings they receive per play from Pandora. David Lowery, one of the writers for Cracker’s 90’s hit “Low”, has voiced a now viral complaint on the Internet. Once the royalties trickled down to him, he received a mere $16.89 for over 1 million plays on Pandora. Granted, a total of $1,370 was issued, but after the record and publishing companies, other songwriters, and any other vested interests took their cuts, all he received was under $20 for his work. According to Lowery and an army of other songwriters, a further cut from Pandora in royalty payment is insulting.

A valid counter-argument on the behalf of Pandora asserts the unfairness of comparing a play on the Internet to a terrestrial radio broadcast. Whereas a play on the Internet reaches an isolated individual or at most a room of a few acquaintances, a single play from a traditional radio station is capable of reaching a million people or more. If terrestrial broadcasters were to pay the amount of royalties that Pandora does per individual listener, the sum would be exorbitant. Moreover, as Pandora confidently points out, Pandora pays compensation to recording artists/performers while terrestrial radio does not, adding to its unique expense over radio. (Historically, radio has paid royalties to the writers of the music it plays but not the performers on the recording. This is because radio play has traditionally been seen as free advertisement for recording artists.)

There are valid arguments on both sides. Whether one sympathizes with Pandora or the writers of the music probably depends more on one’s career and personal interests than an educated conclusion based on sheer logic. As a musician and composer, I tend to relate to those who create the songs and melodies that drive the music industry on which these giant companies rely. Without those catchy, irresistible compositions that keep people listening to the radio, companies in the industry would not exist in the first place. On the other hand, it is understandable that Pandora needs fair rates to be able to compete with its rival. The company has its reasons, too. As its CEO points out, Pandora is still not a profitable organization. Not to mention it streams its music for free.

It seems appropriate to chalk up this whole royalty dispute to ongoing conflict in the rapidly changing music world. Since the advent of Napster in the 1990’s, consumers have begun to expect free music. Illegal downloading, CD burning, free online listens, and cheaper Internet-streaming sites have pushed artists and songwriters to seek out ways to match their previous earnings in the former music industry. As people are no longer buying the CD’s and albums they once did, musicians have a financial cavity that  income from sales used to occupy. However Pandora’s royalties pan out, one thing certain is that songwriters will continue to lobby for fair compensation for their music while consumers will seek out free listening.

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