Oakland (CA) – Escalating music royalties could put Internet darling, Pandora, out of business.  In a recent interview with the Washington Post, Tim Westergren, the founder of the online radio station, says royalties could approach 70% of revenues and that the company is approaching its “last stand”.  Last year, the Copyright Royalty Board ruled that song royalties would increase from 8/100 of a cent per song per listener to 19/100 of a cent per song per listener in 2010.

Pandora is a free website that lets users create their own radio stations based on their favorite artists.  It attracts an estimated 40,000 new customers a day and is a favorite amongst iPhone and other mobile phone users.  Personally, I’ve been listening to Pandora for a few years and consider it to be one of the best attractions on the web today.  There’s no messing around with crap music, just type in the artist you like and only their songs will be played.

SoundExchange collects royalties on behalf of record labels and artists and US Congressmen are trying to mediate lower rates.  Currently online radio stations are levied much higher royalties per song than traditional radio stations.

Pandora makes money with embedded ads from famous companies like Carls Junior and Don Julio.  These ads bring in $25 million a year – not bad for web startup – but Westergren says future royalty payments would eat up $17 million of that take.  Such a huge percentage could soon doom the company, a company that is approaching a “pull-the-plug” decision according to Westergren.

Bleh

Aug 18, 2008 15:03     

Who wrote this, "SoundExchange collects royalties from on behalf of record labels and artists and US Congressmen are trying to mediate lower rates. "? God awful, Humphrey. Step up your game, son. English isnt' for wusses. Am I to assume that Congresswomen aren't doing anything about this? And what's "from on"?
Tex report abuse vote down vote up Votes: -7

this is ridiculous

Aug 18, 2008 15:15     

As a Pandora lover I have to say this is such sad news. This company is doing what no one in the music industry has done in well over 10 years to improve the listening experience by giving us something unique and customizable, bringing new artists to life by picking songs the sounds alike (Music Gnome Project). It has taken the bs out of having to listen to bits and pieces of new songs or just previewing a song's first few seconds before buying something you may not enjoy. Their player's page changes to match the ads, making it that much more enjoyable and less boring. Greed has no limits and by taking a company like this out of the market it hinders advancements in technology and cuts down on the very own bottom line they are trying to increase by leeching on internet radio companies.

HENRIQUE report abuse vote down vote up Votes: +9

Truely Sad

Aug 18, 2008 15:18     

Seeing Pandora go would be a big loss to the internet Radio. Personally, I like Pandora over any other stations. Its truly customizable feature is what differentiates. I think music label advocates have to understand this and agree that the traffic it generates is enough to keep them happy with the royalties. Hope sense prevails.
Akshay report abuse vote down vote up Votes: +5

Very sad

Aug 18, 2008 16:19     

@Tex Congressmen is the correct term. "Congresswomen" is just political BS. Its not sexist its just reality. As far as pandora goes, I'm going to miss it. As soon as I found pandora I loved it. Since it is part of the Gnome music project, maybe they can let us download our like/dislikes.
Jason report abuse vote down vote up Votes: +1

Can someone explain this

Aug 18, 2008 17:08     

How does 19/100 of a single cent per song come out to SEVENTY PERCENT of revenues exactly?
Revrant report abuse vote down vote up Votes: -2

@Revrant

Aug 18, 2008 17:51     

It means that for every dollar Pandora makes from whatever their revenue sources are , 70 cents would go straight out the door for paying royalties. That would leave 30 cents for overhead, profitability, etc. The way this works out is that if 100 people listen to a song at one time, Pandora would have to pay out 19 cents. Times 400 songs a day (roughly 3m30s average), and that's $76 a day for those 100 concurrent listeners, or 76 cents per concurrent listener. Now add server cost, bandwidth, payroll, insurance, legal reserve, etc.

Jim L report abuse vote down vote up Votes: +2

Pandora is a great way for less known artists -- no...

Aug 18, 2008 18:51     

Pandora is a great way for less known artists -- not at the level of neo-folk/street performers, but no-label or non-major-label artists -- to become known. Pandora is a service to the popularity of all artists. If services like Pandora go, then we'll have nothing but whatever the mainstream media wants to sell us, i.e. Britney Spears and Eminem. And I think they're fucking trash. I think most people have SHIT music taste anyway, and if the majority and the record labels they support are running the show with no opposition whatsoever, that'll be a sad, sad day.

VitriolicV report abuse vote down vote up Votes: +2

Buy more Sony....

Aug 18, 2008 21:03     

Buy more stuff from Sony and you'll only support the RIAA more and more causing companies like Pandora to fail.
Narg report abuse vote down vote up Votes: +2