Pandora.com, an Internet radio site that I am personally quite fond of is hitting a rocky patch (if you’re not familiar with Pandora, Murdok recently chatted its CEO Tim Westergren, so check that out).
The phrase “rocky patch” may be putting it lightly if some of the publications around the web are right. Many are predicting the upcoming demise of the company as a result of a federal panel ruling ordering them to pay twice the royalties to artists that they already were.
The way it works now, Pandora pays an organization called SoundExchange, which represents the artists and their respective record labels. The Industry Standard sheds a little more light on radio and royalties:
Because of the bastardized regulation introduced when new forms of music delivery are developed — first, terrestrial radio, then satellite, now Internet — radio station owners pay different rates depending on how the music is delivered. “Traditional” radio pays nothing in performance royalties, though SoundExchange is — of course — trying to change that. Satellite radio companies, for now limited to SiriusXM, pay around 6-7 percent of revenue: roughly 1.6 cents per hour per listener. Internet radio stations like Pandora are required to pay 2.91 cents per hour per listener — a significant chunk of change for companies who, like so many Internet companies, haven’t figured out a way to make much revenue.
It’s not looking good for Pandora. Even Westergren told the Washington Post, “We’re approaching a pull-the-plug kind of decision.”
It’s a real shame too, because for people like us who make our living on the Internet, sites like Pandora can make work more enjoyable through endless playlists of background music that the listener actually enjoys entirely.
