Tim Westergren, founder/CEO of Pandora Radio

Recently, we produced a series of articles here at Sonic Weekly on new music distribution channels, like web radio, and what they mean to you, the artist. During the course of working on the series, we zeroed in on one very important issue: What’s the deal with royalties? Who’s paying them, and how much should they be paying?

Since the spring of 2007, the debate over royalty rates has been raging between webcasters and SoundExchange, which collects royalties for labels and musicians. To find out where the dispute is at right now, we talked to representatives on both sides of the argument. Some of their insights were included in recent articles, but what they had to say was so interesting that we thought it should be reproduced, in full, right here.

Our first interview was with Pandora founder and CEO, Tim Westergren.

SW: “The focus here is going to be how the internet royalty dispute affects musicians, so with that in mind, could you tell us a bit about where is the situation at now, since the Webcasters Settlement Act passed?”

TW: “I’m happy to be able to use the word ‘optimistic’ in describing it now, for the first time in a while, and I think we’re really on the cusp of resolving it. After a long and painful negotiation, we’re pretty close to turning a corner.”

SW: “And, ideally speaking, what would the hoped-for outcome be for Pandora?”

TW: “For us, it’s about a fair rate and a rate that establishes some sort of parity with other forms of radio and allows our industry to flourish. We’re not done, so I can’t really talk about specific numbers, but you know, I’m a musician myself, I’m a big believer in paying royalties, but they need to be reasonable and fair, and they need to be economically rational, looking at the business.”

SW: “So do you see a fair resolution to the royalty dispute benefiting musicians in the long run?”

TW: “I don’t actually want to comment on the specific outcome. Ultimately, the goal for us is at the intersection of what ‘s fair for musicians and what works economically for webcasters, and that’s where this needs to land. And the answer that the copyright royalty board coughed up in March of ‘07 was not at that intersection. It was a badly flawed decision, and it was one that would crush webcasting.

Unfortunately, one of the problems with this whole process is that the interests of musicians have not actually been well represented.  And that’s begun to show within SoundExchange.  SoundExchange is kind of the collecting point for all the constituents that are negotiating this issue. And really, it’s been that bad that the group has been dominated by the interests of large labels, and those are diverging from the interests of musicians, including the interests of musicians on large labels, ironically, because they were pushing for a webcasting rate that was just unaffordable and if you get there, then you destroy web radio, and it gets replaced by an online version of broadcast radio, and that may benefit the labels because their music gets played on broadcast radio, but it doesn’t help the average working artist.”

SW: “In trying to avoid forcing you to say anything definite about where the royalty thing is going – if it panned out in the best possible way, how do you see musicians benefiting from services like Pandora in the future?”

TW: “Lots of ways. First and foremost, Pandora is a radio of inclusion, rather than exclusion. We play the music of over 60, 000 artists, we have a collection of 600, 000 songs, and 85% of those songs play every day on Pandora, so it is a profoundly democratic medium. We’re essentially exposing an otherwise ignored class of musicians to a massive audience and because internet radio has a characteristic of being connected, it creates all these great opportunities for musicians to benefit from that discovery that happens. Whether it’s purchasing a song instantly or learning about the band and joining their fan club, there’s all these opportunities that translate the connection that happens on Pandora into value for the artist.

If you look at the history of digital music, the last 10-15 years have really all been focused on access, you know, making large catalogues of music available. But that hasn’t solved the most difficult problem, which is promotion. It’s all well and good to be available on Amazon, but that doesn’t do anything for you if someone can’t find you there. And that’s been true of music for decades. And Pandora is solving that problem.”

SW: “What would you say to artists about how they can potentially take a step on their side to support internet radio and help it grow?”

TW: “What I think artists really need to do is support and speak up in the context of their respective organizations. And make sure that their interests are being represented. There are different groups that play that role, and they have a seat at the table with SoundExchange, and they need to hear from their members – that they want a speedy resolution, or they want fair rates, or they want decisions that will support web radio, and allow artists to participate. And artists need to do that in greater and greater numbers, because if they don’t, the only agenda that will be pursued is that of the major labels, who are obviously better organized.”

SW: “So you see the industry benefiting as a whole from the continuing success of internet radio?”

TW: “Undoubtedly. It’s going to change the industry. It’s no longer a radio that caters to a very small slice of music, it’s a much more participative form of radio. It’s going to upset the status quo, but I think that’s good for everybody.”

SW: “Do you see it replacing traditional forms of radio?”

TW: “Sure. Absolutely. And eventually, I don’t see broadcast radio surviving internet radio. Internet radio is now getting into the car. If you can get personalized radio in the car, why would you tune in to a broadcast station that doesn’t know or care who you are? I’m pretty optimistic about it.”

SW: “That would be a very different world. Anything else you’d like to say to musicians about what they can expect from internet radio?”

TW: “Just that it’s their friend. The other thing to consider, too, is that the more internet radio replaces broadcast, the better for musicians, because broadcast radio doesn’t pay them any performances royalties. Part of the injustice of this whole royalty system is that internet radio pays this monster rate, that which is the performance fee. Satellite plays a fraction of what we pay, and broadcast radio doesn’t pay any at all, so if you’re in your car and you’re listening to a song from Pandora, the artist is getting the equivalent of a couple of pennies an hour overall. If you’re listening to a song from KFOG, they’re not getting paid anything, so musicians really ought to be supporting internet radio. It pays them.”

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It’s clear that Tim Westergren had strong feeling on the subject. Now it’s time to find out what the other side had to say…

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Author's biography:

Anne Stewart is an author, music journalist, and songwriter based out of Victoria, British Columbia. While biding time awaiting the publication of her best-seller and subsequent retirement on a yacht Ken Kesey-style, she writes for multiple online publications and runs her own successful web design firm, Float Solutions.