Pandora made a splash this morning in an announcement of new label agreements that will underpin a new on-demand music service that the company has been promising since acquiring Rdio assets last November. CEO Tim Westergren held an investor call at 5:15am Pacific time.
The key development is the signing of direct licensing agreements for recorded music with Sony Music and Universal Music Group, two of the three “major” labels, as well as leading indie clusters Merlin Network and The Orchard. Thirty other unnamed indie labels/distributors are also grouped into the announcement.
All these agreements pertain only to U.S. use of the music, so further deal-making is required for the international launch that Pandora publicly aspires to. Terms of the licensing deals were not disclosed in this morning’s announcement. Charles Caldas (CEO, Merlin), Doug Morris (CEO, Sony Music), and Lucian Grainge (CEO, UMG) all issued happy statements this morning. Grainge called it a “thoughtful partnership.”
Directly negotiated music licensing is not new to Pandora. The company has worked out deals with major music publishing agencies for royalty payments to songwriters and composers. Last year, Pandora closed a deal with Merlin for use of records in the Pandora radio service, which is non-interactive and therefore can be licensed via U.S. statutory rates set by the Copyright Royalty Board. The arrangement with Merlin supplanted the government blanket licenses.
“This was a truly collaborative attempt to find a solution that would support artists while profitably growing our respective businesses,” Westergren said. “Working together, we can reshape the digital music market and grow a great business that provides tremendous value to the music industry for decades to come.”
Warner Music remains the major label missing from Pandora’s potential on-demand catalog.
Still no word on how the new service will operate from the user perspective. Will it present significant differences from the standard music-service template as exhibited by Spotify, Apple Music, and Napster? (Each has differentiators, but in broad strokes they are more similar than different.) Westergren was unrevealing this morning, repeating a confident just-wait message we’ve heard in this year’s earnings calls: “Trust me, when this product is in your hands, you’ll like what you see.”
Pandora is definitely planning some kind of mid-tier subscription plan which stands between free listening supported by commercials, and a fully interactive platform which will most likely be priced at $10/month. Pandora currently offers an ad-free version of the radio service called Pandora One, which four-million people use. Something new is in the works, which could present an alternative to Spotify-style freemium, allowing some degree of interactivity but not full music-collection features. Investors are curious, too, and received zero illumination during this morning’s call.
Will they be keeping the radio service in addition to the on demand service?
Yes, they will Julie.