Pandora Inches Closer To The Deadpool Over Royalty Fees

by Jason Wilk on February 17, 2009



  • Last week I had a chance to catch up with Pandora CTO, Tom Conrad at ContentNext’s EconMusic conference in Los Angeles. Tom was in high hopes about the success of Pandora lately, quoting that with their iPhone app alone, they had reached 3.5 million downloads and are seeing some of the highest CPM rates in the industry for internet radio advertising. Their traffic is at an all time high, above 3 million unique visitors a month according to Compete. Like many internet companies at the moment, relying on ad dollars to survive in a down economy is difficult (see: TinyComb). But Pandora is faced with an even more difficult scenario; The Webcaster Settlement Act, which has the potential to put Pandora out of business by raising the per song stream price to $0.19 a song. Please sign the petition at the bottom of the page to help save them from going out of business by lowering online steaming prices.
  • Web sites that stream music have been fighting with the recording industry for two years over the royalties that the sites must pay for each song they play. The record companies and internet radio stations had until this past Sunday to reach an agreement. FM/AM radio stations that simultaneously stream their broadcast over the internet came to an agreement, but standalone services like Pandora and Yahoo Music were left twiddling their thumbs without a deal. According to several people close to the negotiations, the two sides were close to striking a deal, but at the end of the day were unable to agree on some fine points.
  • According to the NYT, “a copy of the proposed term sheet, big Web sites with significant advertising revenue would have paid the greater of 25 percent of their revenue or a per-song fee of 0.088 cents, increasing to 0.14 cents in 2015. Small Web sites with less than $1.25 million in revenue would have paid the greater of 7 percent of expenses or 10 percent of their first $250,000 in revenue and 12 percent of additional revenue up to $1.25 million. If a small Webcaster grows and brings in more than $1.25 million in revenue, the rates for big Webcasters would start to apply. That has rankled some small sites, which say it discourages them from growing”.
  • No one knows what will happen next, but one of the options on the table is to take the case to Congress to ask for an extension on the current deal. If both sides can’t reach a deal, it would give MySpcae Music a significant jump in market share for internet radio. MM is in a unique situation since they launched as a joint venture with all 4 major labels on board, where advertisers are paying per stream. As long as their advertisers stick around, they are laughing all the way to the bank while the rest of the Webcasters struggle for air. Let’s hope for the best for Pandora, the greatest radio station ever.

Cool fact: Pandora’s music genome members still listen to every album before it is processed into the recommendation system. There are still no auto-algorithms trying to tell you what you like. Let’s save this company.

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