Internet radio giant Pandora Media has now forged its first direct record deal with London-headquartered Merlin, an independent music rights group.
Pandora has been paying US mandatory royalty rates, but its partnership with Merlin will allow the Internet radio giant to negotiate rates with Merlin directly – and will place the company in the position to negotiate royalty rates going down the line. Pandora recently paid $219.7 million to acquire music content in the first six months of this year, while earning $413.2 million in revenue.
Negotiating royalty rates would not necessarily help Pandora’s bottom dollar initially, but what it will do is allow Pandora to access indie music artists and give new music to its customers. In return, Merlin’s artists would have a way to break through the music industry and get their content heard by Pandora’s 76 million user base. Access to new music could help Pandora earn more money, thereby bringing down its cost in the long run. “It expands their offering, is good for consumers, and gives them some leverage with the Copyright Royalty Board as they negotiate rates going forward. Merlin gives them a large critical mass of indie labels,” said Wedbush Securities Analyst Michael Pachter.
Pandora may be an Internet radio giant, but the company still competes with the likes of Spotify, iHeartRadio, Apple, and even Samsung for customer ears. Some have said that Internet radio competitor Apple purchased Beats Music and bought out the contracts of Beats Music founder Jimmy Iovine and Dr. Dre (a.k.a. Andre Young) in order to expand its presence in the music industry and secure better contract negotiations.