Market Overview

Pandora's Direct Label Deal Won't Help Artists Get Rich

Pandora (NYSE: P) announced today that it had signed an agreement with Merlin, a global rights agency that represents thousands of independent labels. The deal will allow Pandora to pay the labels directly.

Albert Fried & Company analyst Rich Tullo said that while this is a step in the right direction, musicians may not want to get too excited.

"Spotify is already doing direct deals with artists, so this is a 'me too' kind of situation," Tullo told Benzinga. "To a degree, once an artist publishes a song, it's in the sound exchange, so a lot of this is … not that big of a deal. You can get access to the content one way or another."

Related Link: Is Pandora Co-Founder Will Glaser The Most Generous Entrepreneur In Silicon Valley?

The Need To Help Artists

Tullo said that he had several conversations with former Pandora CEO Joe Kennedy about the need to help artists monetize their content.

"Without being helpful to artists, the service is just cannibalizing the incomes of artists," Tullo said. "We've told this company that directly on five or six occasions."

At the end of the day, Tullo said that the platform that works best is the one that helps an artist (such as Fine Young Cannibals) earn an extra $50,000.

"This [Pandora deal] is not that," he said.

Starving Artists

Tullo thinks that the industry isn't focused on helping musicians make money. 

"Me, if you're not gonna make money, I would have spent $2 or $3 million developing toolkits to give to artists to help artists get people to their concerts and to sell music," he said. "But they don't want to do that. They don't want to help the artist. They want to get the content as cheap as possible so that the artist community starves to death and they can make money -- or not make money and just continue to invest (like Amazon for the next 20 years)."

Disclosure: At the time of this writing, Louis Bedigian had no position in the equities mentioned in this report.

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