Pandora Ready to Pull the Plug

I read a disturbing article today in the Washington Post that Oakland-based Internet radio giant, Pandora, is struggling on the verge of collapse due to exorbitant royalty fees.  This came as shocking news to me.  How can the leading Internet music site, with over 1 million listeners a day and nearly 40,000 new subscribers arriving daily, be failing?

Turns out some federal panel last year, called the Copyright Royalty Board, ordered a doubling of the per-song performance royalty that Web radio stations pay to performers and record companies.  What do traditional radio stations pay for royalties? Nothing, thanks to their corporate parents and lobbying power. Satellite radio stations? About 1.6 cents per listener per hour.  But Pandora and other Internet radio stations will have to pay 2.91 cents under this new ruling.  This year, 70% of Pandora’s revenue will be eaten up by royalty fees – threatening to drive them out of business along with many other Internet radio stations like it.

Is no one outraged by this? Have we all become so complacent in our expectations of free and easy digital music distribution that we’ve stopped paying attention to this issue?  Because clearly the fight is not over. And maybe it will take a giant like Pandora to fall before people start feeling the pain and actually caring. 

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2 thoughts on “Pandora Ready to Pull the Plug

  1. “What do traditional radio stations pay for royalties? Nothing…”

    This isn’t technically right.

    There are mechanical royalties and performance royalties. Mechanical royalties go to the songwriter (and the publishing company) and radio stations pay these. There are performance royalties that go to the recording artist and the record label–terrestrial radio stations don’t pay these, I believe.

  2. Pingback: Important Letter from Pandora Founder, Tim Westergren « the OCMD

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