In casting around online I found this website. Whymusicmatters.com was created by NARM and RIAA as a resource to help consumers find authorized online music services. The site also features videos by various artists singing about the value of music.
“For the first time, in 2011 digital music revenues surpassed those generated from physical sales and that marker was reached because of a breathtaking array of services and platforms embraced by music companies.”said RIAA Chairman & CEO Cary Sherman. ” We understand that with so many options for accessing music online, users are eager for more information about which services are legitimate and what kinds of functionality they offer. That’s why we’re excited to be partnering with NARM and digitalmusic.org to launch whymusicmatters.com, which will hopefully make it easier for fans to access and discover sites that offer their favorite music.”
I’m glad to have found a resource where I can determine if a service is authorized, since it’s one of my personal policies to avoid promoting services that are not. But I’m disappointed in the site – apparently it’s really a site to help consumers find RIAA/NARM’s preferred online music services. It’s really hard to find Internet radio stations because they are listed as “statutory services” under streaming. All the premium subscription services are listed and linked to individually, with logos and descriptions, on that page, and then at the very bottom there’s a box that says “Statutory Services” which opens a new page where the listener has to click through hundreds of alphabetized radio stations (no logos, no descriptions, no links) to find one.
Unfortunately, this site is a glaring in-your-face example of a bad business partnership. Internet radio services, Pandora in particular, are paying a lot of money in royalties to SoundExchange, the royalty collection arm of the RIAA, and in return they get a listing buried deep in the site with no logo or link. Is there any other business you can think of where the vendors treat their retailers so badly? Because that’s what this is, it’s streaming services buying the rights to content and offering it to consumers. And clearly the RIAA and NARM are bad business partners for Internet radio…
Roughly 23% of Sound Exchange’s total revenues in 2010 came from Pandora, based on publicly reported info and some quick math by Live365 Attorney Angus MacDonald.
According to SoundExchange‘s Annual Report for 2010, the collections agency for the RIAA collected statutory royalties from all statutory classes of services in the amount of $263,593,310. That number includes royalties from services other than webcasters, such as satellite, cable services and subscription services.
According to Pandora’s recent SEC filing (dated 5/26/11), Pandora’s revenues were $137,764,000 for its last fiscal year, which ended Jan. 31, 2011. MacDonald notes that his comparison uses Sound Exchange’s calendar year reporting and Pandora’s fiscal year reporting which is February 2010 through January 2011, so it’s not entirely accurate, but very close.
MacDonald uses a factor of 45% as the percentage of Pandora’s overall revenues that the service pays to SoundExchange because that was the percentage that the service paid in their fiscal 2010 year. However, MacDonald also notes that with the newest quarterly report, Pandora’s percentage of revenues owed to Sound Exchange has increased to 53%.
Says MacDonald, “Using the lower figure – i.e., 45% – means that Pandora paid $61,993,800 ($137,764,000 * 0.45) to SX in the 12 months that ended Jan. 31, 2011. That $62 million is 23.52% of SX’s total revenues ($263.6M) collected in CY2010.” He adds that this is 23.5% of Sound Exchange’s overall revenues, the percentage of revenues the agency sees from Internet radio alone would be much higher.