The US Copyright Royalty Board is due to make its decision over webcasting rates today (December 16). The stakes are extremely high.
Morgan Stanley has forecast that a ‘good’ result (for record labels) could see Pandora‘s stock price plummet 28% – worth an eye-watering $780m in market cap value.
That would be devastating for Pandora, which has already lost around $5bn in value over the past 18 months.
But a ‘bad’ result for the record industry, says Morgan Stanley, would see Pandora’s value swing the other way by a similar amount.
For the past year, the CRB has been hearing evidence from both sides of this debate: the record labels and their rep/collection society SoundExchange, and the broadcasters, including Pandora and IHeartRadio. (SoundExchange also represents artists – and pays them directly.)
The CRB’s decision will set the webcasting per-stream rate paid by Pandora, iHeartRadio and others in the five years from 2016-2020.
The most significant party here for the music business, obviously enough, is Pandora, with its 78m listeners.
The current rate paid by the service to labels and artists in the US is $0.0014 per ad-funded (free) stream – up from $0.0013 in 2014.
Pandora told the CRB last year that it wants to bring down this rate to $0.0011 per stream. However, SoundExchange wants to almost double it to $0.0025.
MBW’s rough calculations suggest that if Pandora gets its way, it will cost recorded music rightsholders $94.1m per year at current consumption levels.
That’s $470.5m from 2016-2020.
But if the CRB agrees wholeheartedly with SoundExchange’s proposal, record companies would get $0.0011 more per stream than the current $0.0014 pay out from Pandora.
That would equate to an additional annual income to recorded rightsholders of $345.1m – a grand total of $1.73bn over half a decade.
As we say, very approximate. (And don’t forget that 50% will be paid by SoundExchange direct to artists.)
Also, once the results are in, that’s not the end of it.
Pandora has traditionally struggled to post a profit – a likely trigger for its recent spate of acquisitions and ambitions to launch an interactive streaming service.
What would a $1bn+ extra payout mean for its business model over the next few years?
Troubling.Music Business Worldwide
