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Pandora and Music Royalties

Kevin Allman on how Pandora and other Internet radio companies are paying Louisiana musicians more than conventional radio ever has

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Tim Westergren founded Pandora, the Internet radio company that has 69 percent of the market. In 2011, Pandora paid $149 million in royalties to both songwriters and musical performers. Traditional radio is only required to pay royalties to songwriters, not musicians themselves.

You don't hear a lot of Preservation Hall music on the radio, even in New Orleans," says Tim Westergren. "Part of our mission is not just growing an audience, but also giving musicians a chance to be heard."

  Westergren, the founder of Pandora Radio, was in town during the New Orleans Jazz & Heritage Festival for the 5th annual Sync Up, a music industry conference. It's been a good year for Westergren and Pandora, which has emerged as the country's largest Internet radio service with 69 percent of the market; the service has more than 125 million registered listeners. An April survey by the company Media Audit found Pandora is now the largest radio provider in Los Angeles, far ahead of the city's terrestrial radio stations. In the two months surveyed, Pandora had nearly 2 million listeners in the L.A. area. Those numbers, Westergren says, are reflective of the numbers around the country, including New Orleans.


See how Tim Westergren found his inspiration for
Pandora Radio


  At a morning meeting with Gambit during Jazz Fest, Westergren said, "One of the great benefits of the transition from broadcast radio to web radio, is that web can accommodate a wider range of music. In our collection now we have over 900,000 songs that are part of the system, and we play over 95 percent of those every month. So [Pandora plays] a lot of music that's not getting any airplay.

  "In the case of New Orleans, whether it's blues music or old-school jazz or traditional jazz," Westergren added, "it's being played to an audience that explicitly has an interest in that kind of music. It's not just average exposure. It's really targeted. That's something super-valuable."

  Valuable for Westergren and his company, of course, but also — potentially — for Louisiana musicians who can draw tens of thousands of people to a festival but still can't get played on commercial radio. Because there's one big difference between commercial radio and Internet radio services like Pandora, Slacker and Last.fm: Commercial radio doesn't compensate the musicians it plays — only the songwriters. By federal law, Internet radio must pay both of them.

  When a mega-hit single like Whitney Houston's "I Will Always Love You" was played ad infinitum on radio, the performance earned nothing for either Houston or her record label. The person who made the money from all that radio exposure was songwriter Dolly Parton. "I Will Always Love You" hit No. 1 on the iTunes music charts again earlier this year when Houston died, with concomitant radio play. According to an analysis by The Hollywood Reporter, Parton received $70,000 in royalties for the nearly 40-year-old song in just the one month after Houston's death. And, unlike AM/FM radio, Internet radio spins of "I Will Always Love You" benefited Houston's estate as well.

  With the continuing rise of Internet radio, more and more musicians can expect to be paid something when their music is played — Pandora paid out $149 million to music performers in 2011, more than half of its overall revenue. (The company has yet to turn a profit.)

  But a Frenchmen Street band with a self-released CD shouldn't be pricing Audubon Place real estate just yet. The benefits of Pandora and other Internet radio services are less tangible. At least for now.

Not every city is fortunate to have radio stations like WWOZ-FM and WTUL-FM, which realy heavily on good local music. That, for the uninitiated, is where a service like Pandora comes in.

  Go to Pandora's website (www.pandora.com) or start up the app on your smartphone and you're given the opportunity to either listen to one of 200 pre-formatted stations (including several jazz options, as well as Cajun/zydeco) — or, as most listeners do, create a personalized radio "station" of sorts. Commercials are minimal (three short breaks per hour) and can be eliminated with a $36 annual subscription.

  Type in "Soul Rebels," for instance, and Pandora creates a station that plays not just the Soul Rebels Brass Band, but also Trombone Shorty, the Rebirth Brass Band, Bo Dollis and Monk Boudreaux. Listeners can fine-tune their stations using thumbs-up and thumbs-down buttons. The service learns from this, building a play-list of familiar and unfamiliar artists. Since the software that determines each song is popularity-agnostic, fame and sales numbers have nothing to do with the next song in the queue.

  Westergren says 95 percent of the songs in Pandora's library — more than 900,000 in all — are played at least once each month. Each time a song is played on Pandora or another Internet service, the performer earns money — "a fraction of a penny," says Westergren. (Still, that's enough for The New York Times to call Pandora "perhaps the biggest name in digital music after Apple.") Westergren says Pandora pays about two cents for each hour of radio streamed on its service.

  For most musicians, that adds up to crumbs. Mark Samuels, owner of Basin Street Records, which releases music by Kermit Ruffins, Jon Cleary, Theresa Andersson, Los Hombres Calientes and many other New Orleans artists, says that Internet royalty payments for his musicians do come in on a regular basis, but "they're not much."

  Meaning they'll pay for rent, or pay for dinner?

  "Pay for dinner," Samuels says.

Tracking these performance royalties is a Washington D.C.-based service, SoundExchange, which analyzes broadcasters' logs, collects the money and distributes quarterly payments to musicians.

  "In 2005, we distributed $20 million worth of royalties," says SoundExchange president Michael Huppe. "In 2011, it was $292 million. In the first quarter of this year, it was more than $100 million. And 90 percent of those checks were for $5,000 or less."

  A search through SoundExchange's databases last week found 446 songs on Basin Street Records had been played recently on Internet radio, from artists that included the above-named musicians, as well as Irvin Mayfield, Henry Butler, Jeremy Davenport and more. They weren't alone. Irma Thomas had 239 songs played; Professor Longhair, 236. Even now-obscure Louisiana musicians like Bobby Marchan had 24 different songs played. Cookie and the Cupcakes, a swamp-pop band of the 1950s and 1960s, had 23.

  "Those numbers keep getting better every period," says Samuels, but he says royalties paid by Internet radio listeners are still a small fraction of the business. "If somebody stumbles on our artists [and it] eventually makes them go to a show or buy a CD, that's probably more valuable." (Westergren points out that Pandora listeners who like a song can click on it to purchase at the iTunes Music Store or Amazon.com; Pandora receives a cut of that sale as well.)

  The exponential growth of Internet radio, and income, is due mainly to two things, according to Westergren: broadband Internet access and Wi-Fi taking the place of dial-up connections, and the introduction and adoption of smartphones. Internet radio listeners were no longer tethered to a desktop computer; Pandora and other services are available as free apps on the iPhone, Android and BlackBerry smartphone platforms, as well as the iPad.

  A third factor is now coming into play: car stereos. Westergren's goal is to make Pandora both as ubiquitous and easy to use as a conventional radio. Pandora has deals with more than two dozen car manufacturers, meaning a smartphone owner can control the program through the dashboard just as easily as AM/FM radio. As car radios become Internet-compatible, listenership is expected to have a third major spike, which would raise royalties even higher.

SoundExchange is required to keep royalties for three years, but Huppe says there's an indefinite grace period; the organization strives to get musicians as much back pay as it can. "Sure, we send checks to Lady Gaga and Lady Antebellum," Huppe says, "but last year, of the 60,000 payments we made, 90 percent of those checks were for $5,000 or less. We get letters saying 'Your check helped me replace instruments that were destroyed in a flood,' or 'That check helped me buy my kids winter coats.'"

  In the future, Westergren says, Pandora will be able to help artists track their music's popularity on a map. If there's substantial listening interest in one area of the country, they might want to add a city on tour. And if a listener gives thumbs-up to an artist who will be passing through town soon, a pop-up might appear on screen with venue and ticket information. For a label owner like Samuels, such targeted demographic information might be more valuable than small quarterly royalty checks. "That would be really cool," he says.

  For a small musician, Internet royalties are still crumbs — but taken together, all those crumbs made a $292 million cake last year. So why shouldn't Louisiana musicians get a slice?

— Musicians and their estates can register with SoundExchange (www.soundexchange.com) to begin the royalty-seeking process, which is free.

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