4/4/13: Half of SX's 2012 revenue, and all of its growth, came from Pandora, says digital media attorney

Paul Maloney
April 4, 2013 - 12:30pm

According to a guest columnist in Audio4cast today, nearly 50% of the over half a billion dollars SoundExchange collected from services last year came solely from Pandora!

SoundExchange is the music industry body that collects and distributes royalties for the digital use of copyright sound recordings. When services like webcasters, satellite radio (SiriusXM), cable radio (Music Choice), and business establishment services (DMX) perform copyright sound recordings, they pay SoundExchange, which then distributes money to copyright owners (labels) and performers.

SoundExchange last week released its 2012 financial report (here), revealing it had collected $502.2 million total from services last year (up 35% from 2011's $372.2 million). Digital media attorney Angus MacDonald compared the SoundExchange report with Pandora's most recent 10-K filing (here) and concludes that the top webcaster alone accounts for all of SoundExchange's 2012 revenue growth.

"Pandora paid 55.9% of its revenues to SoundExchange for the fiscal year that ended January 31, 2013," MacDonald wrote in Audio4cast today. "Pandora’s total revenues last year were $427.1 million. Based on the above figures, Pandora paid SoundExchange over $238.7 million ($427.1 million multiplied by 55.9%)" in that fiscal year. "That $238.7 million figure represents 47.53% of SoundExchange’s total royalty revenues ($502.2 million) in 2012," says McDonald.

Pandora paid about $132 million more for royalties in 2012 than in 2011. So while SoundExchange's collections increased by $130 million in a year, that means Pandora completely footed that increase (and a little more). MacDonald also points out that Pandora's FY 2013 royalty bill ($238.7 million) was close to its total revenue for the previous year ($274.3 million for FY 2012).

Pandora strongly backs legislative efforts (such as the Internet Radio Fairness Act, more here) to reform the process that determine royalty rates, in the hopes of decreasing that obligation. Recording industry groups like SoundExchange and the RIAA have strenuously opposed such efforts.

"With Pandora’s ever-surging listening hours and royalty payments, SoundExchange (as well as the record labels and artists who split the royalties collected by SoundExchange) need a healthy Pandora as much as Pandora needs a reasonable Pureplay-like rate for the next royalty term (2016-2020)," MacDonald concluded.

RIAA CEO Cary Sherman recently told The Verge's Greg Sandoval, "Access models" (industry terminology for services that license digital recordings, like Pandora, but also Spotify and YouTube) "are our present and our future... [This] underscores how vital it is to protect these increasingly important revenue streams."

Read MacDonald's guest column in Audio4cast here.

The RIAA issued its revenue report recently which showed $462 million of its 2012 digital revenue -- about 45% -- came from non-interactive digital services like Pandora and SiriusXM (see more in RAIN here).

Paul Maloney
April 4, 2013 - 12:30pm

Triton Digital's Webcast Metrics report (see today's coverage) includes analysis that indicates growing Internet radio listening is being driven by listening on mobile devices.

Now, there are special concerns and issues when it comes to monetizing this listening (compared to over-the-air or desktop streaming). This Sunday at RAIN Summit West, our panel "Profiting from Mobile" will address the question "What are the critical elements to making money with mobile?"

Contributing to the panel is Michael Dalfonzo, director of sales and revenue for Abacast, a software/services provider for online radio. Abacast recently launched cloud-based ad-insertion with partner ESPN (see RAIN here), and technology that allows song-skipping on live broadcast streams (more here and here). Dalfonzo (pictured right) is a broadcast radio programming vet, and an experienced consultant and researcher. He was also VP/Sales at Spacial Audio Solutions.

Speaking of ESPN, senior director of distribution & business strategy with ESPN Audio Patrick Polking joins us as well. ESPN Radio is the most-listened-to single live stream of any AM/FM broadcaster in the world, and mobile is an increasingly important component to that audience. ESPN SVP of production/pusiness divisions Traug Keller delivered the RAIN Summit West keynote last year (here), and took the occasion to preview the newly-updated ESPNRadio mobile app. Polking (pictured left) is a former financial analyst and led business development at Found, Inc.

Special thanks to Clear Channel SVP/local digital sales Michelle Savoy, pinch-hitting on the panel for Clear Channel's Rick Song. Before joining Clear Channel in November, Savoy spent over twelve years with Gannett Digital, specializing in revenue building, business development, and ad operations. The company announced today iHeartRadio's "Perfect For" feature and alarm clock function (which were added in January) are now available on the iHeartRadio Android app.

Moderating our "Profiting from Mobile" panel will be the IAB's Michael Theodore. Also speaking, Pandora's Steven Kritzman (more details here).

RAIN Summit West is this Sunday at the LVH Hotel in Las Vegas. The annual full-day Internet radio conference is a co-located education program of the NAB Show. Now in its 12th year, the Summit focuses on the intersection of radio and the Internet. Keynoting the even will be RAB president and CEO Erica Farber (more in RAIN here

) and Rhapsody International president Jon Irwin (more here

). Very limited space is still available. Links to register are on our RAIN Summit West page.

Paul Maloney
April 4, 2013 - 12:30pm

In its release yesterday of Webcast Metrics February Top 20 Ranker, Triton Digital analyzed the effect of increasing mobile listening on audience metrics.

Overall, AAS (or Average Active Sessions -- the number of listeners to a stream at the average moment in the given daypart) during Internet radio's "primetime" (M-F 6a-8p) grew 6% since January. Year-over-year, that growth is 34%.

[Let's note right here that for our own analysis of Webcast Metrics figures, we almost always use the M-Su 6a-12M daypart, and the "domestic ranker."]

Separating "desktop" listening from that on mobile devices, it's clear which is pulling this growth wagon.

While most listening is still on desktop/laptop computers, "we see impressive AAS growth of 43% in mobile listening, while desktop listening only saw an increase of 5%," Triton Digital explains.

However, as more listen on mobile devices, ATSL (Average Time Spent Listening) tends to fall. Across the board, the Webcast Metrics panel has seen ATSL drop from 46 minutes last year to 39 minutes now. (In the past year, mobile ATSL has fallen slightly, desktop ATSL has risen slightly.)

Triton concludes, "Engagement at the desktop is roughly double that of mobile devices, but the growth in listening is being driven by shorter listening sessions on mobile devices."

Looking at February's numbers, listening was generally flat comparing January to February. The lone major exception was ESPN Radio, down a bit following a January surge likely fueled by Superbowl coverage. Yet its February AAS was still higher than any month before January.

Year-over-year numbers are more heartening, especially for Internet-only webcasters (well, especially for Pandora!) The segment of the panel that's "Internet-only" is up 52% over the last year. That's nearly solely powered by Pandora's growth, which is up 55%, and despite the loss of Digitally Imported and 977Music from this list. The Internet-only segment did benefit from the introduction of Idobi Radio in November, however.

Overall, the Top 20's combined AAS is up 43% year-to-year (Again, this number is different from the overall growth figure in Triton Digital's analysis above, as we're monitoring a wider daypart, and possibly a different ranker. Growth in mobile listening may in fact be driving AAS outside the typical "business hours" daypart, thus making our M-Su 6a-12M number higher.).

Looking at the major broadcasters' streams, Clear Channel and Cox are both up significantly over February of last year (31% and 35%, respectively). CBS, however, is down 25%.

One final note: Pandora's lead over the combined online AAS of the top five streaming broadcast groups is now 71% higher than it was a year ago.

You can see one of the February rankers below. See all of the published Webcast Metrics numbers here. Our coverage of January's Webcast Metrics rankings is here.

RAIN publisher Kurt Hanson will discuss Internet radio listening trends as part of his "State of the Industry" address, and Triton Digital's president of market development John Rosso (pictured) will give a POV (point of view) address, at RAIN Summit West, this Sunday in Las Vegas.

Paul Maloney
April 4, 2013 - 12:30pm

An article in the UK's The Guardian reveals British songwriters earned a record £51.7m in UK royalties from digital music services in 2012 -- more than their take from broadcast radio.

"Digital music players are now the biggest single source of income for songwriters in the UK, having overtaken radio last year after previously eclipsing live events and pubs, according to the UK royalties body PRS for Music," wrote the paper.

Read the full article in The Guardian here.