Pandora Media Inc Signs Breakthrough Deal With Merlin Entertainments

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The U.S.-only deal struck with independent rights group Merlin Entertainments PLC (LON:MERL) is the first deal that Pandora Media Inc (NYSE:P) has signed directly with record labels and instead of paying statutory rates set by the Copyright Royalty Board, it negotiated directly with Merlin. Pandora, the world’s largest online radio company, did not comment on the financial details of the deal nor did Merlin though the latter’s CEO Charles Calas did say, “We wouldn’t do any deal where there was any risk we were going to get paid less.”

Pandora – Merlin deal a win-win?

Calas went on to say that the deal was “a huge opportunity to provide our members previously unavailable and unparalleled access.” to millions of users as it will provide over 20,000 labels and distributors considerably more access to Pandora’s listeners and their data.

Brian McAndrews, CEO of Oakland, California-based Pandora, said the deal would not have a “major impact on costs.” Royalty costs are Pandora’s largest outlay at $111 million, or 50.9% of revenue, in the first six months of year. Those costs are a major concern for investors and have seen Pandora’s stock fall nearly 40% since it hit its all-time high of $40.44 in March.

McAndrews also added that he was “very excited” about the deal given the amount of criticism that Pandora and other streaming services receive based on perceived low royalty payouts for artists.

“We are open to other deals and we feel we can find a win-win-win for labels, artists and Pandora,” he said in a recent interview.

Merlin is bigger than you might think

Merlin represents such artists as Arcade Fire, Bad Religion, and Lenny Kravitz and the deal could see them getting more rotations on Pandora and higher placement in playlists with similar music. Additionally, and possibly more importantly, it will give artists access to Pandora data for the first time that could allow artists to make more informed opinions on where to tour, whom to tour with while gaining tools to directly communicate with fans.

“In a world where it’s very difficult to get onto terrestrial radio, a deal like this gives us an incredible opportunity to get our music in front of an enormous amount of people,” said Merlin CEO Charles Caldas in an interview. Merlin represents around 10% of all music consumed worldwide and its streaming revenues have nearly doubled this year through April.

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