As Pandora defends itself from public charges from Pink Floyd that it is trying to skimp on royalty payments, Apple has made it known that it will pay out higher royalties than Pandora. Pandora is the biggest competitor to Apple’s as-yet unlaunched iTunes Radio service.
Apple offered terms that would, in iTunes Radio’s first year, pay each label 0.13 cents per play coupled with 15 percent of advertising revenue proportionate to the label’s share of music played via iTunes. By the second year those terms increase to 0.14 cents per listen plus 19 percent of associated ad revenue. Pandora pays about 0.12 cents per listen under government-set rates.
According to the leaked contracts, which are being sent to individual labels rather than a label consortium such as Merlin, Apple plans to determine how royalties are distributed which includes how many times listener’s hear a song coupled with how much advertising Apple is able to sell through its iAds program. Apple has also stated that it won’t pay royalties when listeners skip a song before it has played for 20 seconds.
Apple plans to push iTunes download sales through iTunes Radio, sweetening the deal for itself and copyright holders, who will benefit from those sales — one reason Apple could be willing to pay higher royalties than the default, government-set rate. Pandora’s Westergren shied away from a comparison between the two services, telling the Wall Street Journal, “It’s apples and oranges.”
Pandora — the putative “orange” in this scenario — was criticized by members of Pink Floyd for trying to get help in lobbying for to sue ASCAP for lower rates, and joined a group of over 130 other bands that stand in opposition to Pandora’s policies. (Pandora pays royalties under a government-set rate, unlike Slacker or Apple.) In their USA Today op-ed, Pink Floyd’s Roger Waters, David Gilmour, and Nick Mason members claim, “For almost all working musicians, it’s also a question of economic survival. Nearly 90 percent of the artists who get a check for digital play receive less than $5,000 a year. They cannot afford the 85 percent pay cut Pandora asked Congress to impose on the music community.”
Pandora vehemently refutes that it is lobbying for any such thing. Pandora founder Tim Westergren hit back in a blog post at what he described as “a lie manufactured by the RIAA and promoted by their hired guns to mislead and agitate the artist community,” and also sought to empathize with the supposedly dejected artists, writing, “As a long-time working musician myself, I fully understand their emotions and concerns.”
This debate over internet royalties began during the last millennium, and could well last until the next one. It’s a complicated situation for several reasons. AM/FM stations pay no performance royalties, for instance, and internet radio companies are free to negotiate directly with rightsholders, as Apple is doing, even though using its dominance in one market to gain an advantage in another (so-called “vertical integration“) might raise antitrust concerns. In other words, pass the popcorn; this thing is far from over.
(image courtesy of Apple)