Wednesday, June 26, 2013

David Lowery's Misplaced Agression (Again) and Impossibly Bad Math


From the understatement:
David Lowery’s "My Song Got Played On Pandora 1 Million Times and All I Got Was $16.89" article has been picked up over and over and over, including by very respectable folks, often without comment. 
This has left many readers with two impressions:
Pandora only paid $16.89 for 1 million plays.1
Pandora pays much lower royalty rates than Sirius XM and especially terrestrial AM/FM radio. Music royalties are complex, but both of these are patently untrue
WHAT DID PANDORA PAY & WHAT DID THE BAND GET?
Step 1. Lowery and his royalty reports clearly state he only owns 40% of the songwriting. As he says, this means the total fee to the songwriters was $16.89 x 2.5, or $42.23.
Step 2. Songwriters actually only get about 43.5% of the songwriting/publishing rights. The publisher and the songwriters split the fee 50/50 after the rights administrator’s (BMI in this case) operating expenses, which appears to be about 13%. So the full songwriting/publishing fee was in fact about $97.
Step 3. Pandora also pays a separate royalty for the performance itself, distinct from the songwriting. In 2012, that royalty was $0.0011 per streamed song.2 For 1,159,000 plays, that works out to a total performance royalty of $1,274.90.
After the administrator SoundExchange takes its fee of 5.3%, the performance royalty is split, with 50% going to the recording owner (i.e. record company), 45% to the band/performer, and 5% to any session/backup musicians. So the band in this case received $543.30 for their performance.
Conclusion. By this math:
Pandora paid a total of about $1,370.
The band received a total of about $585.
If Lowery received 40% of the performance royalty, “all he got" for the 1 million plays was in fact around $234.
Whatever one thinks of the fairness of those numbers, they’re all clearly far larger than $16.89. 

Read more here.

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