The other day, the Canadian singer-songwriter Selina Martin opened her latest royalty statement outlining the money coming her way for online streaming of her music. There, in black and white and a whole bunch of decimal places, was a damning portrait of the new economy that went something like this: $0.003 for streaming her song "Public Safety Management" on the radio service Rdio, $0.00695 for the on-demand streaming of her acclaimed cover of Rush's classic "Spirit of Radio" on Spotify, $0.01788 for a premium subscriber to listen to her song "Throw Me in the Water" on Rhapsody.
"It just seemed ludicrous," she said Thursday during an interview. Even adding up all those fractions of a penny, cascading down 719 lines of an Excel spreadsheet, didn't amount to anything significant. "It just seems like a slap in the face," she said, then added ruefully, "It becomes comical."
Laughs have been rare lately for folks like her. But in the past few years, as the music industry's radical collapse began to slow, musicians started looking with hope to online streaming as a potential saviour. Companies sprouted up, with dizzying valuations. On Wednesday, Spotify announced Coca-Cola had bought a $100-million share of the streaming service, valuing the company at $3-billion. And consumers, some of whom feel residual guilt about illegal downloading, are certainly excited. Pandora, which serves up songs based on information provided by a listener, had 59.2-million active users around the world at the end of October, up 47 per cent in a year; it claimed 6.55 per cent of all U.S. radio listening last month, an increase from 4.27 per cent in October, 2011. (It is not currently available in Canada.) Many are subscribing for free, but millions are paying a few dollars a month for an ad-free version.
Spotify has about four million members around the world paying about $20 each per month for unlimited access to customized playlists. Rdio, which came to Canada last year, offers a similar service for $10 a month.
If that seems inexpensive for a service that fans say precludes the need to ever buy music again, that's because the companies are benefiting from inputs that are priced as commodities. Or, to drop the Economics 101 argot for a moment: the musicians are making diddly.
Yes, even Diddy. And if Pandora has its way, they'll soon be making even less.
On Wednesday, more than 100 artists signed an open letter criticizing Pandora for trying to get its royalty rates lowered through an act in the U.S. Congress. The musicFIRST coalition, which includes Katy Perry, Bryan Adams, Rush, Billy Joel, Maroon 5, Robert Plant, and others, said the company's support of something called the Internet Radio Fairness Act could gut their online streaming earnings by up to 85 per cent.
"We are big fans of Pandora. That's why we helped give the company a discount on rates for the past decade," the artists said in the letter, published at FairPayForArtists.com. "Let's work this out as partners and continue to bring fans the great musical experience they rightly expect."
Pandora says it needs the Act – which would put the company on a more even playing field with services such as Sirius satellite radio – to survive. "Last year, Pandora paid 50 per cent of our revenue to record labels and artists. That's over six times the rate paid by Sirius-XM," said the company's founder, Tim Westergren, in an online video asking users to call their members of Congress.
Mr. Westergren has a strong reputation of being a friend of musicians, and in the video he appears in a collar-less shirt, hair askew, standing in front of musical instruments. "In the long run, growth of Internet radio is better for artists," he said.
But even as he plays that role, musicians have hammered Pandora for capitalizing on the company's IPO last year, which now values the company at about $1.3-billion. "Pandora has the gall to complain about the fraction of a penny they pay artists for use of our music – without which Pandora couldn't exist – while Pandora's top executives have been busy compensating themselves to the tune of millions of dollars per year in salary, bonuses, and stock option grants," said Ray Hair, the president of the American Federation of Musicians, in a statement.
And here's the punchline. Some time next year, the rumour is that Apple is going to launch its own streaming music service. They'll use their dominant market share in downloaded music to squeeze competing companies like Pandora.
But it's the musicians who will end up hurting.