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Pandora and Paul Williams: Lots of Bark, but How Much Bite?

Stocks in this article: P SIRI AAPL

There's a fundamental conflict here. Songwriters might argue that these two numbers -- 55.9% and 4.7% -- should be closer together. From the performer and labels' perspective, they perform the music, support it with tours and considerable investments therefore should collect a larger chunk of the pie.

Again, all interesting issues, but best saved for another time. Because, I can tell you this, Paul Williams is having none of it. And I can't say I blame him.

After I put all of my energy into tearing apart a complex issue, I like to try to boil down to something close to black and white. That's the opposite approach of most of the rest of the tech, financial and music media with relation to the royalty story. Sadly, most start from black and white, leaving a trail of dichotomy to the bitter, confusing and ultimately meaningless end.

As I have gone through this process -- and watched harsh rhetoric, half truths and outright lies dominate the conversation -- I have come to a simple conclusion, one I think Pandora will end up realizing (if it already doesn't).

I'm repeating myself, yes, but, in this mess, you can't make a sane and logical point too many times: Pandora has a more compelling case on the performance side; the songwriters and composers have the more compelling case on the publishing side. Again, Pandora can generate not only royalties for performers, but all sorts of new revenue tied to touring, merchandise sales, advertising and others avenues mere mortals have not even begun to conceive. It's not quite the same song for songwriters and composers.

As such, that group has the most meaningful beef.

There's no way in the world anybody in their right mind can defend the discrepancy between what Pandora pays in performance royalties and what Sirius XM (SIRI) satellite radio, television and broadcast radio pay (or don't pay).

I've heard every argument in the book; none of them hold up under the slightest scrutiny. The music industrial complex wants to keep a system in place that favors physical sales, turns the screws on indies and ignores the role of data and technology to drive new and additional revenue for performers ( see, e.g., the structure of Apple's (AAPL) iTunes Radio proposal to independent labels).

Simply put, there's zero vision from a group of people who should be and have the massive opportunity to be among society's most visionary -- performers of music.

However, until you find credible ways to broaden the compensation scheme for songwriters and composers, you'll be hard-pressed to convince me that Pandora shouldn't pay more than (roughly) 4.7% of its revenue to the organizations that distribute chunks of that money to the actual creators. On the flip side, the 55.9% of revenue it paid to SoundExchange last quarter needs to come down, whereas everybody else's rate needs to go up. Each and every party must take an active role in helping performers generate the highest value possible from their music.

That's where and how Pandora must act before others steal its thunder. Buy up or partner with the Soundwaves and Ticketflys of the world, companies focused on harnessing data to unleash the monetization monster that is music.

From there, Pandora will receive -- as it clearly should -- a much better (and more fair) deal on performance royalties (the 55.9% chunk of revenue), which will allow it to pay considerably more to the songwriters and composers (the 4.7% piece of the pie), as it clearly should.

-- Written by Rocco Pendola in Santa Monica, Calif., and New York City

Rocco Pendola is TheStreet's Director of Social Media. Pendola's daily contributions to TheStreet frequently appear on CNBC and at various top online properties, such as Forbes.
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