NEW YORK (TheStreet) -- The English rock band Pink Floyd launched a tirade two years ago against Pandora (P), charging that nearly 90% of musicians who receive a check for digital air-play get less than $5,000 a year. Hardly enough to live on, the band said in an open letter.
In a general defense of Pandora, rival music-streaming service Spotify recently shot back that management teams for big artists possibly step in and snatch up streaming royalties it says range from a comparatively higher $5 million to $10 million a year.
The back-and-forth, filled with passion and finger-pointing, seems endless. Songwriters continue to proclaim they're not paid enough; Pandora says rates are reasonable and they want to be the musician's partner.
For Pandora, the issue of paying musicians to stream their music isn't some marginal issue. Music royalty fees comprise 50% of Pandora's costs, one major reason the Oakland, Calif.-based company, the Internet's largest radio service, remains unprofitable, losing $25 million, or 12 cents a share, in the quarter ended March 31.
Despite Pandora's financial struggles, musicians pushed for and won a major decision this month after insisting that allowing rates to remain at current levels would set a devastating precedent.
Earlier this month, Judge Louis L. Stanton of the U.S. District Court in Manhattan ruled in favor of the licensing agency BMI, establishing the rate Pandora must pay BMI at 2.5% of revenue, up from a previous 1.75%. That decision followed a ruling by the 2nd U.S. Circuit Court of Appeals in New York in Pandora's favor that kept Pandora's rate to rival licensing agency ASCAP at 1.85% of revenue.
More litigation will follow.
"Streaming is the future, and we want these services to be successful," Grammy-winning musician Paul Williams, president of the American Society of Composers, Authors and Publishers, or ASCAP, a performance rights organization, said in a statement. "For Pandora to claim the rate they pay songwriters is the difference between being profitable and being in the red is absurd. They'd rather make songwriters a scapegoat than try to fix the system and adjust their business model."