Pandora has revealed how much certain top artists are paid in royalties for licensing their music to the internet radio service.
Wrote Pandora cofounder Tim Westergren in a blog post:
For over two thousand artists Pandora will pay over $10,000 dollars each over the next 12 months (including one of my favorites, the late jazz pianist Oscar Peterson), and for more than 800 we’ll pay over $50,000, more than the income of the average American household. For top earners like Coldplay, Adele, Wiz Khalifa,Jason Aldean and others Pandora is already paying over $1 million each. Drake and Lil Wayne are fast approaching a $3 million annual rate each.
This revenue stream is meaningful. I remember the many years I spent in a band when earning an additional thousand dollars a month would have been the difference between making music an avocation and a hobby. We’re talking here about the very real possibility of creating, for the first time ever, an actual musicians middle class.
Recently, New York Magazine published an estimate of what musicians currently make from digital services like Spotify compared to iTunes and record sales. By their calculation, internet streaming services aren’t as lucrative.
Adele would be making something like $650,000 for 130 million streams compared to the $1.25 million she’d make from 5 million downloads on iTunes and the $8 million she’d make from selling 4 million CDs.
The middle class, in this case, would be the “indie four-piece,” who would only take home $100 for 20,000 streams, $31,250 for 125,000 downloads, and $250,000 for 125,000 CDs sold. (These numbers include an estimate of how much of each the bands are likely to sell and depend on who else gets a cut of the profits.)
Westergren pointed out in his post that referral sales are on the rise: Pandora listeners purchased 29 percent more music in the second quarter of 2012 than they did this time last year.
“Pandora was founded on the principle of supporting artists and we’re proud to pay performance fees,” he added. “We think artists could and should ultimately earn even more. But all of this revenue is coming from a single company. A predatory licensing fee orchestrated over ten years ago by the RIAA (Recording Industry Association of America) and their lobbyists in Washington has devastated internet radio.”
Basically, Pandora is pushing for the “Internet Radio Fairness Act,” which would put digital radio services in the same category as traditional radio stations so that they wouldn’t have to pay higher royalties. In 2011, Pandora said it spent more than 50 percent of its revenue on performance royalties while satellite radio service SiriusXM paid only 8 percent, forcing Pandora to rely more heavily on ads.
Added Westergren, “Making performance fees fair for internet radio will drive massive investment in the space, accelerating the growth of the overall sector, and just as importantly accelerating the development of new technology that leverages the incredible power of the internet to build and activate new audiences.”
Image by Aliaksandr Autayeu via Shutterstock.