Today, news broke that Merlin—a global rights agency representing independent labels—entered into a deal with Internet radio leader Pandora that seems to align the incentives of both parties while maintaining direct payment to artists.
Overall, we are glad to see a major music service commit to better serving indies using technology, and with a shared goal of growing audiences for that music (and thereby generating more revenue).
Although the financial terms of the agreement have yet to be disclosed, there are several aspects that look positive for the indies, including listenership data that can be useful to labels and touring artists, as well as opportunities for artists on Merlin labels to utilize “customized communication channels” for direct fan engagement. Under the deal, data from Pandora’s Music Genome Project will also be used “to identify select tracks for additional exposure on Pandora’s playlists targeted to the right listeners,” according to the announcement.
Here at FMC, we’re pretty attuned to anything that could be considered “payola“—the practice of big labels paying for special treatment on broadcast services at the expense of other music. In this instance, it seems that what’s actually happening is that Pandora will use its algorithms to deliver songs to fans whose listening habits already align with that music. As Pandora CEO Brian McAndrews told Billboard, “No song is going to show up on Pandora that wouldn’t have shown up anyway. It just might show up sooner and, if they like it, more frequently.” While it’s important to keep in mind that Merlin doesn’t include every independent label out there, it does have some 20,000 of them. If the new partnership allows more of that music to be heard by listeners, we think it’s a good thing.
FMC has sometimes taken issue with direct deals, because they aren’t always transparent and may not compensate artists directly. We’re pleased to note that under this partnership, Merlin artists will be paid via the nonprofit SoundExchange, just as they are under the statutory license that enables the collection and distribution of royalties for digital radio. (The labels’s share will be distributed by Pandora.)
We’re also encouraged by the news that the deal doesn’t amount to a reduction in rates for indie labels or artists. Although we don’t have exact financial information, Merlin CEO Charles Caldas told Billboard that the rates compare favorably with the existing statutory, and that “we wouldn’t do any deal where there was any risk we were going to get paid less.”
We’ve long said that there’s no reason that the relationship between Internet radio and the independent sector shouldn’t be positive. Webcasters like Pandora already perform a far more diverse array of music than AM/FM, and a huge chunk of those plays come from indie artists and labels. Where the independent sector and a music service can come together to drive listenership and growth, it reinforces the value of this music to fans and the platform alike.
While we remain skeptical of many direct deals, it’s important to bear in mind that hundreds of independent labels have recently committed to greater transparency in royalty accounting to artists. Until we hear differently, we’re going to assume that this commitment extends to the new deal and any potential revenue generated from non-music uses. In the meantime, we’re glad that Pandora and Merlin have identified areas where their incentives align, and encourage more folks in the music space to embrace that general approach.