Pandora's licensing agreement with Merlin follows a protracted battle over the rates it pays to publishers.
Pandora Aug. 6 announced its first-ever direct licensing agreement with a record label, striking a deal that London-based Merlin called a "huge opportunity" for its 20,000 members. Merlin is a group of independent labels representing several well-known artists including Bad Religion and Vampire Weekend (above).
"This is an important step to advance Pandora's ongoing commitment to build a vibrant and sustainable music industry. It's a true partnership that will grow our collective businesses, help artists reach larger audiences, and give our listeners an even better music discovery experience personalized to their tastes."
Pandora founder Tim Westergren claimed that the deal would "help musicians of all career stages build their audiences."
As part of the deal, Merlin will receive demographic data on the Pandora users who listen to their artists' music, which could in turn help these artists determine where they're most popular for later touring.
Pandora on Sept. 11 reached a licensing agreement with management group BMG, which holds the rights to songs by Beyonce, Jay-Z, Frank Sinatra, Bruno Mars and John Legend and other major artists.
Music royalties are Pandora's single largest expensive, costing the online radio company $111 million, or around 59% of its total revenue, during the first half of 2014.
Pandora spent much of 2013 in court against the American Society of Composers, Authors, and Publishers (ASCAP) arguing over the rates it would pay the group. A New York federal judge ruled in March that Pandora would continue to pay 1.85% of its total revenue to ASCAP, the same amount as under a previous agreement.
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ASCAP has around 475,000 members including well-known acts like Katy Perry, Jay-Z, and Aerosmith. Its primary function is to license members' music for public performance, including for play on radio.
Controversial music company Grooveshark plans to launch a Pandora-like streaming radio service in January, the company said Dec. 8. The streaming radio service will pay the same government-mandated licensing fees that other online radio services must pay.