Pandora to pay royalty of 17 cents per 100 songs, up from 14 cents, after copyright board decision, with rates rising with inflation through 2020
but not as much as music labels wanted Peter Kafka / Re/code : Pandora Will Need to Pay More for Its Songs, but It Could Have Been Worse Nathan McAlone / Business Insider : Pandora stock plunges then soars after music royalty hike — now up 20% Joan E. Solsman / The Wrap : Pandora Ordered to Pay Labels Higher Royalty Rate Ben Popper / The Verge : Pandora is going to have to pay labels more for their music Tweets: Aaron Pressman / @ampressman : Current streaming fee: $.0014 New fee for 2016: $.0017* Music labels wanted: $.0025 * per @miriamgottfried close reading Pandora up 20% $P @zerohedge : U.S. COPYRIGHT BOARD RELEASES MUSIC-STREAMING RATE DECISION; Pandora -26% See also Mediagazer
Context & Ripple Effects
2015 was the year Pandora's licensing costs got repriced from every direction: a court ruled it should pay 2.5% of revenue to BMI instead of 1.75%, and it agreed to pay the RIAA $90 million over pre-1972 recordings. The Copyright Royalty Board's move from 14 to 17 cents per 100 songs completes the pattern — but lands well under the 25 cents labels requested, which is why the stock plunged on the hike itself and then recovered to up roughly 20% once the full number was clear.
The rate is indexed to inflation through 2020, so this isn't a one-time reset but a rising cost floor for Pandora's ad-supported core business while the company was already leaning into paid tiers.
First-order effects
- Pandora's per-stream performance royalty cost rises about 21% starting in 2016, directly compressing margins on the free, ad-supported tier that still accounts for the bulk of its 80M-plus listeners.
- Labels and publishers lose the 25-cent ask but gain an inflation escalator through 2020, locking in future increases without renegotiation.
Second-order effects
- With statutory rates climbing on top of the BMI court increase and the $90 million pre-1972 payout, Pandora's incentive to shift listeners to Plus and Premium intensifies — the subsequent earnings reports show exactly that pivot, with subscriptions growing even as total listener counts stagnate.
- Spotify, Apple Music and other licensees now have a fresh CRB benchmark to negotiate against, since the board's number sets the reference point for direct deals with labels.
Third-order effects
- If rate-setting keeps outpacing ad revenue growth, the structural endpoint is an industry where ad-supported radio-style streaming is a loss-leader funnel into subscriptions rather than a standalone business — the path the related coverage shows Pandora already traveling by 2017-2018.
- Regulatory bodies (the CRB for mechanicals, courts for PRO fees) become the de facto pricing power in streaming economics, making every five-year rate cycle a sector-wide repricing event rather than a market negotiation.
The trend: Statutory and court-driven royalty increases are systematically repricing ad-supported streaming, pushing services like Pandora to convert listeners into subscribers to protect margins.