Pandora is saved – Internet radio agrees reduced royalty deal

July 8, 2009

Pandora is saved - Internet radio agrees reduced royalty dealFor a long time it looked as though Pandora and other Internet radio stations were set to go out of business due to the preposterously high royalty fees being forced on them. In the end, common sense has prevailed, with a deal being struck which ensures Pandora and other stations’ futures for at least a few more years.

The Copyright Royalty Board in 2007 raised the royalty fees imposed on Internet radio stations such as Pandora. By 2010, they were set to hit 19/100 of a cent per song per listener compared to just 8/100 in 2006. For Internet radio stations, many already losing money, this was a kind of last stand for Webcasters, with Tim Westergren, the founder of Pandora and its Music Genome Project, stating last August that his company was likely to go bust.

Thankfully, Pandora and others have won a last-minute reprieve thanks to heading back to the table and doing a deal with SoundExchange, the organization charged with collecting royalties on behalf of the music rights holders. However, as TechCrunch reports, it does mean giving up a large share of their revenues.

The resolution basically means that Internet radio stations can now opt to pay a royalty rate that’s 40-50 percent lower than was previously set or agree to give up 25 percent of its U.S. revenues, depending on which of the two is a higher total figure. The deal is set to run until 2015, with both sides considering it an experiment at the current time.

Pandora is also now limiting its free service to those who listen for less than 40 hours per month. Anyone listening to the Internet radio station for longer will now have to pay $0.99 for unlimited listening privileges for a given month or upgrade to the $36-a-year Pandora One service. But this is thought to only affect about 10 percent of the 1 million-plus Pandora listeners.

Pandora Chief Technology Officer Tom Conrad said in an email:

Pandora is finally on safe ground with a long-term agreement for survivable royalty rates. The unresolved licensing issues have hung over us like a dark cloud for two years. It’s a great feeling to have the road cleared of that obstacle.

So, Pandora, and all the other smaller Internet radio stations have had their futures ensured for the next five years. Which is brilliant. However, there is still a huge difference in the rates paid by Internet radio stations and their traditional radio rivals. Until this emerging technology is regarded as of equal value to the years-old technology then Pandora and the like will still struggle to compete.

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