Digital Home Thoughts: Could Pandora be Close to Pulling the Plug?

“We're approaching a pull-the-plug kind of decision,” says Pandora founder Tim Westergren in an interview with the Washington Post, regarding the livelihood of his online radio station living under a massive royalty hike imposed last year. “This is like a last stand for webcasting.” The rates that Westergren refers to were placed in effect last September by the Copyright Royalty Board and performance rights organization SoundExchange, who enforce and collect payments, respectively, on behalf of song owners for public performances of their music. Westergren’s service, Pandora, is one of the internet’s largest such performers – over a million listeners tune in the service per day – and one of the few online radio stations that give listeners the ability to create their own stations on the fly. Online broadcasters both large and small decried the royalty rates when they were announced last year. Both analysts and the stations themselves predicted a nearly certain doom if the situation didn’t change fast. By and large, it didn’t. Despite heavy opposition, the new royalty rates – which analyst Kurt Hanson of radio industry newsletter RAIN once estimated to be a fourfold increase in costs – went into effect, and the issue quietly left the spotlight."

Pandora is certainly in a tough bind. While it continues to try and lobby legislatures to reduce the royalty fees, it is trying to keep its investors from pulling out (which of course would spell Pandora's demise) by trying to show that its profits are greater than its costs, and clearly the royalties are not helping them. I am personally not sure who I would support here because on the one hand it looks like the CRB is working on behalf of the artists whose music Pandora is providing, and on the other hand Pandora is providing a pretty reasonable service. Hmm hard to say, what do you think?