Pandora will have to pay record labels more money for streaming their music: The Copyright Royalty Board decided on Wednesday that the company and other ad-supported non-interactive streaming services like it will have to pay $0.0017 per song streamed to consumers, or $1.70 for every thousand streamed songs.
Up until now, Pandora had been paying $1.40 per thousand songs for its ad-supported tier. The judges of the Copyright Royalty Board also lowered the amount Pandora will have to pay for its existing subscription radio service from $2.50 per 1000 songs to $2.20 per thousand songs. The company expects that it will have to pay a “blended” rate of $1.76 per thousand songs next year, compared to $1.53 per thousand songs this year.
“This is a balanced rate that we can work with and grow from,” Pandora’s CEO Brian McAndrews said in a statement, adding: “This decision provides much-needed certainty for both Pandora and the music industry.”
The ruling is significant cost increase for Pandora, but it’s still a lot less that what rights holders had hoped for: SoundExchange, which collects internet radio performance royalties on behalf of the music industry, had asked the board to institute a rate of $2.50 per thousand songs played. Pandora investors reacted with optimism to the ruling, sending the stock up 19 percent in after-hours trading.
SoundExchange expressed disappointment with the ruling in a statement published on its website Wednesday afternoon: “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.”
The royalties that internet music services like Pandora have to pay rights holders have been a point of contention within the industry for a number of years. Pandora doesn’t have to strike individual licensing deals with record labels for the use of their music, and instead relies on statutory licenses. Rates for these licenses are being set by the Copyright Royalty Board, a three-judge panel that has been appointed by the Librarian of Congress.
Eventually, these licenses could become obsolete for Pandora as the company is moving to strike direct licensing deals with labels and publishers. Pandora has already inked deals with BMG, Sony/ATV and Warner/Chappell amongst others, and is looking to use these new deals to add a Spotify-like on-demand music subscription tier to its service next year. In November, Pandora acquired the assets of failed Spotify competitor Rdio to kick-start those efforts.