Pandora, web radio may fold due to high royalty fees

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[Above: Pandora founder Tim Westergren]

The day the (Internet) music dies may well be in our sight, as web radio powerhouse Pandora recentlyannounced it may have to shut down due to high royalty fees lobbied on webcasters.

Pandora boasts over a million listeners daily and is one of the most popular iPhone applications. Nevertheless, “We're approaching a pull-the-plug kind of decision,” Tim Westergren, founder of Pandora, told The Washington Post. “This is like a last stand for webcasting.”

The problem is royalty fees exacted by a federal panel. Last year, the panel doubled the fees a webcaster has to pay per listener per song, meaning Pandora will pay 70 percent of its expected $25 million revenue, according to Westergren. Traditional radio outlets, on the other hand, pay no such fees to artists, and satellite radio stations pay smaller fees.

Webcasters and SoundExchange, an organization that represents recording artists and their labels, have already begun negotiations about lowering the fees for Internet outlets. If Pandora can’t afford to pay the royalty fees, it’s a good bet that smaller outlets can’t afford them either.

Currently, Pandora’s income comes from advertising spots on its website, not from audio spots. Ideas for more revenue include sponsored blocks of airtime, a la National Public Radio.

Pandora’s days may be numbered, but hopefully the music won’t ever really die. Paste Radio, anyone?

Related links:
High Gravity: 8 Best Free Music Apps for the iPhone
Pandora.com
Music Genome Project

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