Will the Real Pandora Please Stand Up?

Everyone has been discussing the recent backlash of megastars as a result of the royalty cuts made by Pandora Radio.  Just last month, Congress held a hearing with the C.E.O. of Pandora, Joseph Kennedy, and other informed industry representatives (like Jimmy Jam, a representative for the Recording Academy).  This article discusses many negative effects of the failure to determine a fair way to set royalty rates for internet radio music play.  Pandora will pay over half of its revenue in royalties this year and the company’s stock is slowly taking a hit because of the losses.  Just on December 4^th, price per share was steady creeping to $9.45, and on December 7^th dropped to $7.97 (which is still better than the $7.19 per share on November 16^th, when artists like Katy Perry and Rihanna wrote an open letter to the company about their “hurtful” royalty cuts).

     One could say artists making seven figure incomes could not really hurt from these royalty cuts. Jimmy Jam, on the other hand, puts the scenario into perspective for the middle class musicians who make the modest five figure income like the rest of us.  Jam claims that Pandora offers some musicians a tenth of a penny per play, which averages about $4 a year in revenue for the artist.  He also went on to say that most of the time, the artist only gets half of that revenue after the royalty is cut due to other expenses.  There really are starving artists struggling with greedy royalty cuts by such a huge company.  Apparently other large internet radio providers, like Spotify, have witnessed losses in 2011 as well (The New York Times).   
     One big question is how iHeartRadio seems to be just fine during such a testing time in the industry.  One answer might point to its parent company, Clear Channel Broadcasting Inc..  Clear Channel is able to use its massive backing from its other established subsidiaries to use internal funding (while companies like Spotify are invested by other companies like Coca Cola and Fidelity). iHeartRadio appeared much larger and more popular among artists from its inception, but unfortunately, Clear Channel is also losing money, with a net loss in 2011 of $300 million. 
     Maybe it is really time for a change in the industry.  With artists walking around throwing money, while literally everyone else and every other company struggles to make positive income, it’s easy to see where the real cuts should be made.  Entertainment is a necessity, but should it really cost the nation staggering losses in so many sectors of the industry? 
-RashaunahAsya