Music streaming way up, as are Pandora's royalties

Music streaming is leading digital music sales past physical sales, but can streamers afford the royalties?

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Performance royalties do, however, also apply to satellite radio, which partly explains why SiriusXM is currently suing SoundExchange, the non-profit performing rights organization that collects and distributes these performance royalties to artists and labels.

The digital royalty issue is already a serious one for Pandora and others, and one which some feel may threaten their survival if something doesn’t change. Under the current laws and rates they could very well be doomed to collapse from the weight of their own success.

However, there may be a light at the end of the tunnel. Clear Channel recently struck a deal with the record label Big Machine (home to Taylor Swift and Rascal Flatts, among others). Reportedly, Clear Channel has agreed to pay Big Machine performance royalties for their broadcasts, which they wouldn’t otherwise have to pay, in exchange for tying digital performance royalty payments to a percentage of their advertising revenue. This in spite of the fact that 98% of their current audience comes from broadcast, only 2% from digital. Clearly, they are gambling on the growth of their digital audience.

Is this the way that Pandora and other music streamers will be able to keep their business model profitable in the face of a rapidly growing audience? My fingers and toes are crossed that it is; I’d hate to not be able to listen to the Flock of Seagulls channel on my smartphone.

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