Math-checking the testimony on Capital Hill in “How Much For A Song?: The Antitrust Decrees That Govern the Market for Music.”

According to Billboard, SONGS Publishing CEO Matt Pincus provided some mathematical evidence before members of Congress today in support of his claim that “This rate of money [from performances on Pandora] is not fair for my songwriters.”

Now, I could and would never take a stand on what royalty rates might be “fair” when it comes to the fates of songwriters, publishers, labels, and performing artists. What I can do, however, is use data to check the maths that emerge from these arguments — particularly arguments made in testimony on Capital Hill — both for and against whatever might be fair. We can as least try to debate the fairness of the same numbers!

In this testimony, Mr. Pincus referred to three songwriters affiliated with SONGS Publishing receiving only $3,158 for 124,000,000 streams on Pandora. Unfortunately, this amount may not tell the entire songwriter story.

In this post, we are going to compare estimates based upon claims of the Payee to those based on the claims of the Payor, and see where the numbers fall.

To do this comparison, we are going to adjust Mr. Pincus’ figure for the fact that there may actually be six writers, not only three, for the song in question — Kama Sutra, performed by Jason Derulo (perhaps also Kid Ink) — suggesting the total amount paid to songwriters might be twice the amount referenced in testimony.

Then we will add to this revised songwriter payout that amount paid to publishers, as well as the administrative fees charged by related PRO(s).

After which, we are going to check those maths by estimating an effective per stream payout to songwriters and publishers and PROs, per stream, from Pandora; using Pandora’s own, publicly available financials.

Payee: What we are going to find is that if we adjust Mr. Pincus’ numbers for what wasn’t said, we will estimate a rate of $0.00012 per stream paid to songwriters/publishers/PROs on a per stream basis via Pandora.

Payor: And, if we use Pandora’s own financial statements, we will estimate a rate of $0.00012 per stream paid to songwriters/publishers/PROs on a per stream basis.

After which, the planets align, the oceans return to safer levels, and the debate over fairness can continue using, at the very least, the same numbers.

The Deep Dive

Now, in the following exercise I may have done my math wrong. But, at least I will show you my math.

While the exact song to which Mr. Pincus referred was unclear, a quick search surfaces the result that SONGS publishing has a claim in the song Kama Sutra, performed by Jason Derulo (and also Kid Ink). Feel free to investigate AllMusic or other sources to confirm.

Six writers are associated with Kama Sutra: Brian Collins, Christian Ward, Jason Desrouleaux, Dijon McFarlane, Mikely Adam, and Breyan Isaac.

In testimony, Mr. Pincus refers to $3,158.05 as the payout made to three writers. If there are in fact six writers, a simple back-of-napkin adjustment would be to double the figure, leading to a total of $6,316.10 paid to the six writers of Kama Sutra for these millions of performances on Pandora.

Now, Sony/ATV, Warner/Chappell, Universal Music, and SONGS publishing are listed as the publishers associated with the song. Let’s just assume a 50/50 split between songwriters and publishers in the royalties received for the performance of the song. Not a crazy assumption given these are “blue chip” publishers, and we are talking about payments through the PRO’s, and Mr. Pincus may have labeled these amounts as the writers’ 50% share.

Such a move would lead us to $12,632.20 being the total payout for these 124,000,000 performances on Pandora: $6316.10 to songwriters and $6316.10 to the publishers.

Since these royalties would have been paid through a US Performance Rights Organization, let’s say ASCAP (since Pincus is on an ASCAP Board), some fees would have been taken by the PRO — approximately 12% of total song royalties using ASCAP’s latest figures. As a result, the total paid for the performance of the song would be approximately $14,354.77.

Now $14,354.77 divided by 124,000,000 streams on Pandora would result in an effective payout of approximately $0.00012 per stream. Or, if you would rather be extremely precise, $0.00011576429619 per stream.

So let’s compare that figure to what we might estimate using Pandora’s own numbers.

Pandora’s end-of-2014 financials we learn the company earned roughly $920,800,000 in revenue in 2014. And, there is reason to believe, at least according to sources like the LA Times referencing BMI’s own testimony in a rate-setting debate, that 4% of Pandora’s revenue is paid to US PROs for the performance of songs (not recordings).

Four percent of $920.8 is roughly $36,832,000 paid in royalties to the PROs, roughly 88% of which passes through to songwriters and publishers.

We also learn that the company streamed 20,030,000,000 (that’s 20.03 billion) listener hours in 2014. And, using the very back-of-napkin assumption of songs with an average length of just under four minutes, we guesstimate about 15 songs played per hour with some time left over for ads.

20.03 billion hours of listening at 15 songs per hour leads to 300,450,000,000 unique song streams on Pandora in 2014.

$36,832,000 in total payouts divided by 300,450,000,000 streams equals an effective payout of approximately $0.00012 per stream. Or, if you would rather be very precise with guesstimates, $0.00012258944916 per stream — an amount that differs from the prior estimate by 5%.

Given we are working with numbers that extend from the millions of dollars and billions of uses to the fractions of pennies, I am inclined to find a 5% difference in two estimates to be within a reasonable margin of error.

And so, we find that if we adjust Mr. Pincus’ numbers for what may not have been said, we will estimate a rate of $0.00012 per stream paid to songwriters/publishers/PROs on a per stream basis via Pandora.

And, if we use Pandora’s own financial statements, we will estimate a rate of $0.00012 per stream paid to songwriters/publishers/PROs on a per stream basis.

After which, the planets align, the oceans return to safer levels, and the debate over fairness can continue using, at the very least, the same numbers.