Coyote Tracks

There’s a lot that’s been written over the past couple of years about battles over online music royalties, most recently in the form of David Lowery’s article, “My Song Got Played On Pandora 1 Million Times and All I Got Was $16.89.” Michael DeGusta produced a well-researched rebuttal estimating that Pandora actually paid over $1,300 for that, and points out that when you consider this on a basis of listeners per play Pandora (and by extension other similar services like Spotify) are paying far more than terrestrial radio: generally, only one person was listening to each of those million plays on Pandora, while tens of thousands of people are hearing each song play on commercial FM.

Of course, if you’re a performer or songwriter, what matters to you is how much money you’re actually getting in total, not per play, and a future in which you’re making a fraction of the revenue you are now is not one you’re likely to be enthusiastic about. Even if DeGusta is correct and Lowery actually made $234 for those plays, that’s still less than one-fifth of what he’s making from conventional radio airplay. If you assume Lowery is making hundreds of thousands a year that doesn’t sound so bad, but the median income for a composer is about $46,000.

Pandora, for their part, has pointed out that they pay more money per song than any other radio service “broadcasting” on any media–by more than four times on average–and while they didn’t call attention to this, Pandora is, despite their revenue and subscriber growth, losing money. They’re not losing money as fast as Spotify is losing money, so, uh, that’s something. The main source of Spotify’s massive bleeding? You guessed it–royalty payments.

Of course, Pandora and Spotify don’t have the same business model, not exactly: Pandora is kind of a radio station, whereas Spotify is “subscribe to your whole music library.” Because of this, Spotify actually pays a higher rate per song play than Pandora does. But it’s still not very much, so it leaves us in the same place, with musicians and songwriters screaming at them for being cheap bastards and them screaming back that they’re losing money as it is and they can’t possibly be expected to pay more.

And while we’re all primed to look for villains in any story like this, they’re both right. It may not be possible for services like Pandora or Spotify to simultaneously pay as much money as non-Internet radio stations do and turn a profit. This suggests that this is a lousy business model. Spotify in particular reminds me of the old joke about selling goods at a per-unit loss, believing you can make it up in volume. It’s the Webvan of streaming services.

Apple’s soon-to-launch iTunes Radio is following the Pandora model–I suspect it’s “iTunes Genius Mix” with Apple’s library rather than your library. It will, according to Billboard, pay “slightly more than the pure-play rate that Pandora pays,” but slightly is slightly. Yet unlike everybody else, Apple can tie their “radio” directly to their online music store, and you can bet that when the first middle-aged rocker writes a whiny anti-Apple editorial Eddie Cue will hold up a balance sheet showing just how many songs have been sold directly from iTunes Radio.

Apple has long maintained that people would rather own their music than subscribe to it. I’ve known more than a few users who’ve disagreed–people who use Spotify for all their music listening–and, of course, Spotify and their competitors are betting Apple is wrong, too. In the final analysis, though, the question may not be about what consumers want after all: you can go broke giving people what they want.