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August 19, 2008

music

In face of exorbitant fees, Pandora may have to pull the plug

Posted Aug. 19, ’08, 1:02 PM PT by David Dahlquist
Category | Music

Pandora Radio.jpgComing on the heels of Muxtape’s unceremonious shutdown, it appears that Pandora, one of the web’s most popular radio services, may be nearing its untimely end as well. Despite the fact that it serves nearly 1 million listeners daily, is one of the 10 most popular applications for the iPhone, and is rapidly growing its customer base, the site is struggling to make ends meet due to—you guessed it—the wrath of the lumbering, suicidal music industry.

Ever quick to shoot themselves in the foot, the industry giants have used their power of influence to set a new, government-mandated, per-song performance royalty rate that will double the current fees that Web radio stations must pay to performers and record companies. This exorbitant fee is necessary, of course, because when an internet service freely promotes and introduces new music to potential buyers of said music, it harms the industry in catastrophic ways. Compensation must be made to the poor labels whose artists are being exposed to the masses for free! Never mind that traditional radio stations are exempt from such fees. But I digress.

According to the Washington Post, Pandora’s fees to the record labels this year will amount to a crippling 70% of their projected revenue of $25 million. This, of course, isn’t sustainable, and if things don’t change quickly, they’re going to call it quits.

“We’re losing money as it is,” said Pandora founder 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.”

If Pandora closes its doors, it will not only signify a major loss for online radio (and iPhone) users, but also the loss of a primary means of discovering new artists for thousands of music enthusiasts. This will translate to loss of revenue for the record labels both from any Pandora per-play fees, and from the substantial album sales made by people who routinely discover new music through the service. Way to go, RIAA.

If you’re interested in joining the effort to save net radio, check out SaveNetRadio.org. In the mean time, enjoy the wonders of Pandora while you still can.


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