Pandora to Close?
jamie on August 18th, 2008
Due to an increase in per-play royalty fees, the popular Internet radio site may have to shut down operations if a profitable solution cannot be found. Pandora’s founder, Tim Westergren, told the Washington Post that the company expects to be shelling out as much as 70% of their $25 million in revenue this year- a number too high to continue operation. Recently, the site launched an application for the iPhone, bringing true Internet radio to the mobile platform.
The hike in royalty rates was ushered into legislation last year by industry group SoundScan (who collect and distribute these royalties to labels and artists), nearly doubling the rate per play on the Internet. The U.S. Copyright Royalty Board set these per-song performance rates for Internet outlets higher than those paid by Satellite radio or traditional radio stations (who pay NO performance royalties). SoundScan argues that the potential to profit from Internet radio is higher than other mediums, and therefore the rates are fair.
In January, after attempting to hammer out a deal with UK labels and publishers, Pandora blocked usage of their service to users outside the United States. In a statement on the company’s blog, Westergren said
“It continues to astound us that the industry is not working more constructively to support the growth of services that introduce listeners to new music, and that are totally supportive of paying fair royalties to the creators of music.”
Recently, another major Internet outlet, last.fm, has started paying royalties directly to certain independent artists, cutting out SoundScan, and reducing the per-play amount they have to pay.
