Market Insight

BMG enters into direct deal with Pandora

September 15, 2014  | Subscribers Only


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International music rights company Bertelsmann Music Group Rights Management (BMG) has entered into a direct deal with personalised radio service Pandora. The terms of the deal mean that:

  • BMG’s music catalogue will be license to Pandora directly rather than through one of the US collecting societies, ASCAP and BMI.
  • BMI gains access to Pandora data on listening behavior

Pandora enjoys 76.4 million active monthly users as of Q2 2014, mostly located in the US.

Our analysis

Traditionally Pandora has relied on statutory, collective licensing agreements rather than engaging with labels and publishers directly. However, since the beginning of 2013 this has started to change as the most popular digital music service in the US has begun to do direct deals with both labels and publishers.

These deals vary considerably in scope, not least because the way that interactive radio licenses are set up in the US mean that Pandora does not have to secure agreements directly from labels to offer a service and its agreements with publishers have traditionally also been handled through collective licensing agreements. This stands in marked contrast with on-demand services like Spotify which needs deals from both publishers and labels.

The precedent for the BMG deal appears to come from Pandora’s recent agreements with both Universal Music Publishing (UMP) and Merlin and these correspond to the dual nature of BMG’s rights management business which covers both publishing and recording rights, with the latter being more commonly associated with labels.

  • Publishers: Publishers are increasingly restructuring the way they do deals by moving away from collecting agencies in favor of direct deals with music services. For publishers direct deals offer the potential for greater control and flexibility in the deals they can strike. In the US Pandora finds itself on the frontline of this broad trend, e.g. in January 2013, UMP ended its digital rights agreement with BMI and ASCAP to pursue a direct deal with Pandora; and the personalized radio company’s latest deal with BMG should be seen in the same light. Interestingly Pandora has indicated that the financial restructuring should allow more transparency in its royalties system.
  • Recording rights holders: Pandora’s deal with Merlin, the collective bargaining agency representing over 20,000 labels and distributors, in August 2014 appears to have been more focused on giving Merlin’s labels access to Pandora’s data (e.g. location data for tour planning) and opening out the platform for merchandising opportunities. Rather than representing a radical rethinking of the rights that Pandora acquires. 

Geography
North America USA
Organization
Pandora
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