Exorbitant Fees May Force Pandora to Shut Down Popular Radio Service
Pandora is quite simply one of the best ways to discover new music on the web. What Pandora lacks in social discovery tools (like those popularized by Last.fm), it more than makes up for with its brilliant music matching algorithm. Recently Pandora experienced a surge of new listeners thanks to an excellent iPhone app, but unfortunately that may not be enough to save the popular internet radio service.
Tim Westergren, founder of Pandora, recently told the Washington Post that the service is “approaching a pull-the-plug kind of decision.” The service says it won’t be able to continue in the face of the new exorbitant licensing fees levied on internet broadcasters. At the behest of the music industry, the licensing fees for internet radio are roughly double what traditional radio stations pay.
For Pandora that means that 70 percent of this year’s projected revenue of $25 million will go to pay royalties. Already the service has been forced to shut down its international broadcasts.
So why must internet radio stations pay exorbitant performance rights fees when terrestrial broadcaster pay nothing to broadcast the same songs to a much larger audience? There doesn’t seem to be answer to that questions save the cynical one: internet radio lacks the powerful Washington lobby that traditional radio has developed over the years.
Curious how powerful that lobby is? Consider this: traditional radio pays nothing in performance royalties.
It’ll be a shame if Pandora shuts its doors, especially given that Pandora is playing, and exposing people to, artists far outside the limited playlist of mainstream radio, artists many would never know were it not for Pandora.
Of course yet another example of the music industry shooting itself in the foot is hardly news. Between the lawsuits, DMCA takedown notices and crippling web radio fees, you’d be forgiven for thinking the music industry is designed solely to stop you from listening to music.
And sad though it may seem, it doesn’t look like the music industry will be satisfied until it has firmly knotted the noose and taken a last suicidal leap to its final resting place in the history of bad ideas.
Pandora isn’t giving up the fight just yet, Westergren says that NPR-style ads are in the works, but even that seems unlikely to save the company over the long run. Pandora is looking to Rep. Howard L. Berman (D-Calif.) who is fighting to reach a last-minute deal to lower the broadcast fees.
But if Berman fails, Pandora doesn’t plan to stick around. “If it doesn’t feel like [the royalty fees] are headed towards a solution,” Westergren tells the Post, “we’re done.”
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