Pandora is being forced to raise its per stream rate in 2016 after a recent ruling by the Copyright Royalty Board in Washington. Until now, Pandora had been paying labels 14 cents for every 100 streams on a song. Starting in 2016 and continuing through 2020, the service will have to raise its rates to 17 cents. It could be adjusted to reflect price fluctuations during that time period.
During the proceedings, Pandora had argued that their rates should be decreased to 11 cents, while the major labels wanted the rates to rise up to 25 cents according to The Verge.
While an increase in three cents may not seem like much to the average consumer, over billions of streams this could be a concern for Pandora, which has struggled to turn a profit and has seen its share price tumble over the past year. The streaming radio service will have to accelerate their push to covert free users into paying subscribers to try and offset the coming price increase.
Pandora recently went on an aggressive spending binge, purchasing Ticketfly to make money off of live events and incorporate it into its offerings. It also bought a large portion of Rdio, which it then shut down to attempt and build out the on-demand component of its service.
Artists will be delighted to hear that Pandora will be paying more, but they will just have to lobby their labels to actually pony up some of that streaming money, which is opaquely distributed to artists.
Unlike other streaming services like Spotify and Apple Music, Pandora has not negotiated directly with the labels and has instead stuck with what the Copyright Royalty Board decides for them. It has worked out thus far, but we will see how long they continue if the rates start rising further.
