Pandora loses and agrees to pay $90 million to pre-1972 artists for record labels

25 Oct 2015 | Author: | No comments yet »

Pandora Coughs Up $90M to License Older Songs.

The sharp decline comes after the company reported a loss of almost $86 million yesterday. Pandora Media Inc. plummeted the most since going public in June 2011 after issuing a sales forecast that fell short of analysts’ estimates and recording charges of $81.8 million to settle legal disputes with the music industry.The labels – ABKCO Music & Records, Capitol Records, Sony Music Entertainment, UMG Recordings and Warner Music Group – were represented by the Record Industry Association of America, and argued that Pandora was violating copyright laws in not paying royalties on music that was more than 43 years old.

In a bit of a tricky situation for streaming services, federal copyright law applies only to songs created after 1972, but some state laws apply to pre-1972 tunes. The call was the company’s first report on earnings after the June 30 launch of Apple Music, and Friday’s dive shows investors were not pleased with how the Oakland, California, company stacked up against the fledgling streaming service. The Internet radio company is facing stiff competition from Spotify Ltd. and Apple Inc. while battling record labels and music publishers over how much it pays to play their songs. Due to a U.S. copyright loophole, Pandora has played these songs without compensating Warner, Sony, Universal and other labels that own the rights to the master recordings in recent years. Pandora’s loss comes as Apple says its music service has gained 6.5 million paid subscribers, and 8.3 million people are still using the free three-month trial.

Sales this quarter will be $325 million to $330 million, Pandora reported Thursday, less than the $351.5 million average of estimates compiled by Bloomberg. “We now see competitive actions sapping growth from Pandora’s model, as the ‘cost of admission’ to direct talks with labels is getting pricey,” analysts at Piper Jaffray Cos., who downgraded the stock to neutral, wrote in a note Friday. Pandora’s policy prompted a backlash among classic artists — Buddy Holly’s estate had called non-payments by Pandora and SiriusXM an “injustice,” and Stax soul guitarist Steve Cropper, who appeared on numerous Otis Redding and Sam and Dave hits, complained to Rolling Stone last year: “I’m part of a catalog of music from the Sixties that got re-released in the Seventies and Eighties, and some today, so I still get an income. Brian McAndrews, Pandora’s CEO, said that the music streaming site was “excited to have found a resolution” with the record labels that filed their suit in April 2014.

But they just keep chipping away and chipping away.” The Recording Industry Association, which represents the major labels, sued Pandora over the non-payments last year — shortly after Flo and Eddie of the Turtles filed suit on similar grounds. For the years beyond that, the streaming service will have to work out future deals with the labels, with whom McAndrews said Pandora hopes to “continue to foster a better, collaborative relationship”. We appreciate the collaborative and constructive approach of Pandora’s team in resolving this longstanding issue for artists and labels.” The RIAA sued SiriusXM in 2013. The thought, at the time, was that such a large payout would encourage record companies to pursue similar settlements with other services—which seems to have panned out.

Mad Max will roar back out of the apocalypse while Mad Men rides off into the sunset, rock’s Antichrist Superstar and hip-hop’s Yeezus will rise again. According to the RIAA chairman and CEO, Cary Sherman, both settlements ensure “that an iconic generation of artists and the labels that supported them will be paid for the use of their creative works”. Pandora’s radio stations are as great as ever, but when you want to listen to Adele’s new single and have an ugly cry, you don’t want to hit an Adele station and hope that song comes on. Though Pandora is sure to boost marketing for Ticketfly events, being able to draw concert goers for too well-known bands does not indicate that Pandora will necessarily be able to sell-out venues for bands with smaller followings.

Though Wall Street may be losing its faith in the company, Pandora will keep the music playing and test new products to drive up engagement in the next quarter, McAndrews said in yesterday’s call.

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