8.20.2008

Pandora to go silent

This truly could be the day the music died...again. According to founder Tim Westergren, music genome project and recommendation service provider Pandora may have no choice but to close up shop because of high royalty fees. Despite an estimated one million daily listeners and a new iPhone application that attracts roughly 40,000 new customers per day, Pandora’s founder said in a recent Rolling Stone interview, “We’re approaching a pull-the-plug kind of decision. This is like a last stand for webcasting.”

Pandora's demise stems from last year's decision by a federal panel, the Copyright Royalty Board, that doubled the per-song performance royalty of tracks played on Internet radio stations. The board decided that the fee to play a music recording on Web radio should increase from 8/100 of a cent per song per listener to 19/100 of a cent per song per listener by 2010. Multiplied by the millions of songs in the catalogue and the thousands of listeners Pandora serves worldwide, this translates to roughly $17 million this year according to Westergren.

“I was on the bus when I get this message on my Treo,” Westergren tols the Washington Post. “I thought, ‘We’re dead.’ ” This year Pandora could lose 70 percent of its $25 million revenue made primarily through ads appearing on the site to royalty fees. Pandora is currently part of a negotiation between Webcasters and SoundExchange, who represents artists and record companies, to lower said fees.

Streaming radio stations such as Pandora are subject to per transmission fees while traditional radio stations do not pay any royalties. Satellite radio stations face a much smaller fee. On June 26th, 2007, thousands of Internet radio stations went silent to protest the higher fees.

1 comment:

KBO said...

This is sad. I have found many great bands through Pandora, although I've moved on to Last.fm.