San Francisco - Popular online radio channel, Pandora, which
allows users to choose the songs and artists they want to hear, is
likely to close down soon due to a massive increase in royalties
demanded by the music industry, the site's founder Tim Westergren
said.
'We're approaching a pull-the-plug kind of decision,' Westergren
told the Washington Post in an interview. 'This is like a last stand
for webcasting.'
The troubles faced by Pandora reflect the constant tension
between music producers and internet companies, which since the
advent of music sharing site Napster 10 years ago have used digital
technology to distribute music without reimbursing music companies.
Pandora's decision was prompted by the Federal Copyright Royalty
Board's decision last year to dramatically hike royalties for Web
radio, acting under pressure from SoundExchange, an organization
comprising representatives from record labels and performers.
The royalty increase now amounts to some 70 per cent of Pandora's
25 million dollars in revenue, Westergren said.
'We're losing money as it is,' said Westergren. 'The moment we
think this problem in Washington is not going to get solved, we have
to pull the plug because all we're doing is wasting money.'
Pandora, which has millions of users online and is one of the most
popular applications for the iPhone, uses a proprietary system called
the Genome Sound Project, to identify music that users might like
according to the song and band preferences they input.
According to Pandora, it will have to pay 2.91 cents per hour per
listener under the new rules, while satellite radio will pay about
1.6 cents per hour. Traditional radio pays nothing in performance
royalties.
SoundExchange says that the increased rate is justified because
internet radio stations can broadcast millions of songs an hour
rather than the handful of tunes included on the playlists of
traditional radio stations or satellite radio.
The group also charges that internet radio stations are not make
serious enough efforts to make money with most declining to insert
audio ads between songs or charge subscription rates for premium
services. The royalty rules have been especially hard on university
radio stations, many of which broadcast online and do not have the
resources to pay higher fees.
According to the Washington Post, Congressman Howard L Berman is
trying to broker a last-minute deal between webcasters and
SoundExchange but the two sides appear to be far apart.
'Most of the rate issues have not been resolved,' Berman said. 'If
it doesn't get much more dramatic quickly, I will extricate myself
from the process.'
USA
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