In the wake of last night’s Copyright Royalties Board (CRB) ruling on webcasting rates in the US, it’s clear which side is happiest with the $0.0017-per-stream rate for commercial non-subscription services: Pandora, rather than SoundExchange.
“We’re pleased to finally have much‐needed certainty on the rate structure for our core Internet radio business. While next year’s CRB rate will be 15% higher than we currently pay, it is still well within our range of expected outcomes,” Pandora boss Brian McAndrews told analysts last night.
“This is a rate we can work with and grow from. Importantly, the new structure is set at a level that allows us to aggressively invest in a vibrant and growing music ecosystem.”
SoundExchange’s statement in response to the ruling made for quite the contrast. “We believe the rates set by the CRB do not reflect a market price for music and will erode the value of music in our economy. We will review the decision closely and consider all of our options,” explained the company.
“Additionally it is deeply disappointing to see that broadcasters are being given another unfair advantage” – this referring to another aspect of the ruling: the lack of a percentage-of-revenues clause in the new rates.
SoundExchange’s response makes it clear there may now be an appeal against the new rates – which remember, are only set at $0.0017 for non-subscription webcasters for 2016, with the potential to rise or fall after that, linked with the US Consumer Price Index.
But the comments to think about came from McAndrews a little later in his call with analysts, when he reminded them of Pandora’s wider royalties strategy.
“As we noted last month, the CRB rates are likely to play a far less central role in Pandora’s business as we move toward the future. To fully unlock the global and functional potential of our business, we’re aggressively pursuing direct licensing agreements,” said McAndrews.
Besides publishers (Sony/ATV, Songs, Warner/Chappell) on the label side, Pandora has signed direct deals with Naxos and indie agency Merlin.
“With the CRB process behind us, I’m confident our discussions with labels will accelerate,” said McAndrews. The ruling is still very important – it’s a baseline for those negotiations with labels, most obviously. But the main thing is not to judge Pandora’s future sustainability on the CRB ruling alone.
Pandora isn’t doomed by the new rate, but it certainly isn’t guaranteed a profitable future either. The company’s dealmaking, product development and marketing skills for the ‘full stack music’ service it wants to become in 2016 will be key to its prospects.