Royalty Board Decision Deemed Success Pandora Labels Not Pleased But Are Relieved

OAKLAND, CA -- The Copyright Royalty Board has handed down a decision that has pleased neither streaming music services nor record labels. And that may be the best possible sign that a panel of federal judges made the right decision.

According to the decision, streaming services like Pandora will pay record labels 17¢ for every 100 times they stream a song to listeners who do not pay for subscriptions. The new rate represents a 3¢ increase over the current rate, but far short of the 25¢ per 100 plays sought by record labels. For their paid subscriptions, webcasters will pay 22¢ per 100 performances, which is down from the current rate of 25¢.

"This is a balanced rate that we can work with and grow from," said Pandora chief executive Brian McAndrews. "The new rate structure will enable continued investment by Pandora to drive forward a thriving and vibrant future for music."

Last year, Pandora, the largest streaming service, paid more than 40% of its revenue in royalties, about $400 million. That figure is likely to increase once the new rates go into effect. On the bright side, the deal, which extends from Jan. 1, 2016, through Jan. 1, 2020, provides welcomed stability for both sides of the industry.

The new royalty rate structure also eliminates the discrepancy between so-called "Web rates" for such companies as Pandora and commercial broadcasters. While Pandora's free streaming service will see an increase, outlets like iHeartRadio will see a decrease from 25¢ to 22¢ per 100 performances.

Notably, the panel's ruling only applies to Internet radio services, which let people hear a set of songs tailored to their musical tastes. It does not apply to on-demand services like Spotify, which allows listeners choose the exact songs they want to hear. The judges' decision also does not cover songwriting rights.