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Pandora offers song and dance about music sales

Pandora cofounder Tim Westergren takes to company's blog to make case government should save the day for his business. Does the government belong in a business dispute?

Tim Westergren, Pandora cofounder.
James Martin/CNET

Pandora's represents a golden opportunity for artists to cash in on Internet radio, co-founder Tim Westergren wrote today.

To prove his case, Westergren rolled out some heady numbers. He noted that three little-known artists are on track to make $100,000 in performance fees from Pandora. Westergren says that the Web's top radio service will pay over $10,000 each to 2,000 individual artists over the next 12 months.

Some 800 artists will receive payments of $50,000 or more. Artists such as Coldplay, Adele Wiz Khalifa, Jason Aldean will receive $1 million or more and Drake and Lil Wayne are on track to hit $3 million apiece.

As Tom Cheredar of VentureBeat learned, the performing artists don't necessary take home all the payments. Pandora told him: "If the artist retained ownership of the copyright, then the featured artist would receive 95% of these amounts with the remaining 5% going to non-featured artists (after whatever cost SoundExchange takes). If the artist has sold the copyright to another entity such as a label, the performing artist still would receive at least 45% of these amounts, non-featured artists would receive 5%, and the copyright owner 50% (some of which could make it back to the featured artist depending on the deal they struck when they sold their rights), again after whatever cost SoundExchange takes." SoundExchange is a non-profit that provides the rights management fee processing.

A few million or even $50,000 sounds good until you realize that Pandora generated $100 million in the second-quarter alone. My music industry sources have said for a long time that the majors and indie labels have complained for a long time that Pandora doesn't generate a lot of money for artists and that it siphons off demand for downloads.

Certainly, Pandora sounds a lot more artist friendly than Spotify. The knock on Spotify, the on-demand service, which unlike Pandora, enables listeners to hear what they want when they want, has long been criticized for not sharing enough revenue with artists. But one-upping a competitor is not why Westergren is not playing up Pandora's ability to pay artists.

Pandora's leadership is trying to whip up support to get the government to lower the rate Internet radio services pay to play music. This will be the second time in Pandora's history that the company has asked for price breaks.

It's true, right now Pandora is at a disadvantage. Traditional radio broadcasters pay a lower rate to play songs and the music industry wants terrestrial radio to pay a rate that is more in line with what Pandora pays. The old-school broadcasters say no way.

You're going to be hearing a lot rhetoric about this in coming months from all sides but ask yourself if this is the problem for government or whether the sides should be hashing this out at the negotiating table.

Last updated: 5:50 p.m. PT to add the Pandora comment.