Pandora's CFO Talks Royalties, Streaming and Apple

With a major, bottom line-impacting decision on royalty rates imminent, Pandora's chief financial officer Mike Herring was feeling brisk during an investor's conference call on Thursday, delivering body blows to Apple Music and even Steve Jobs while offering a look inside his company's future in streaming music, according to The Hollywood Reporter.

Mike Herring

Soon, the Copyright Royalty Board will decide statutory royalty rates to be paid to labels and artists by non-interactive web radio stations like Pandora over the next five years. According to Herring, Pandora paid 40 percent of its Q3 revenue to the labels, "so it's a big deal." Pandora wants to lower its rate from 0.14 cents per stream to 0.11 cents per stream. SoundExchange, which collects and distributes those royalties, wants a rate of 0.25 per stream.

He did caution that a higher rate could potentially land more streaming services in trouble, because "costs are so prohibitive that if you are not really amazing at it you go out of business. That's what happened to Rdio, right?" he said, referring to the service whose core pieces were sold to Pandora as it went bankrupt. "A beautiful product, a great product, but the business is just too hard. The costs are just too high."

Herring's thoughts on Apple were not cheery. "No one subscribes" to Apple Music, he said, even though the app exists permanently on hundreds of millions of phones. "Well, I guess a few million people do, but the reality is you want to get people to choose to do, that is a much bigger trick. You have to have a great product."

Herring said Pandora is trying to bring the music industry back, because "it's had a tough 15 years. I mean Steve Jobs eviscerated the music industry with the launch of iTunes and it's been downhill ever since. And the download was supposed to save it, that didn't happen."