Pandora raises new funds for Net radio business

Shortly after announcing a favorable new royalty payment deal with the music industry, the Internet music-streaming start-up Pandora confirmed that it has raised new funding from Greylock Partners.

The size of the round is $35 million, according to a Friday report at PE Hub, a forum for private equity discussion. Pandora confirmed that Greylock Partners led the investment and said David Sze from the venture capital firm has joined its board.

"Consistent with our past practice, the amount and valuation are not being disclosed," the company said in its statement. "New funds will be used toward the continued growth and development of Pandora."

Pandora is among Internet music-streaming sites that last week reached a music royalty deal with SoundExchange, the group that collects royalties on behalf of artists and labels.

For revenue, Pandora currently plays and shows advertisements and offers a $36-per-year premium service that offers higher sound quality and eliminates the ads. Because of the new royalty agreement the company will require those who want to listen to more than 40 hours of music per month to pay 99 cents for unlimited listening that month once they reach the threshold.

That new fee affects about 10 percent of Pandora's present listeners, founder Tim Westergren said in a blog posting, but he was still jubilant about the deal, declaring, "The royalty crisis is over!...Pandora is finally on safe ground with a long-term agreement for survivable royalty rates."

Existing investors include Crosslink Capital, Walden Venture Capital, Labrador Ventures, King Street Capital, Hearst Corporation, DBL Investors, and Selby Ventures, Pandora said.

[jlopezcnet]

Wow, $1 is not alot to ask for considering the amount of great music I hear on Pandora. I even buy a song or two from time to time.

I would gladly give them $2 bux a month just to keep their site going.

Thank goodness it was something reasonable or I'd be forced to wander the net aimlessly to find new house music. :-)

[Super2online]

I wonder how they feel about Microsoft announcing a new FREE streaming service for MSN similiar to Spotify that also allows you to purchse tracks.!

[milrtime]

I wouldn't really call it "a favorable new royalty payment deal with the music industry" considering they will still have to pay significantly more than terrestrial radio stations for doing the same basic thing. The new "lower" payments are just lower than the insanely high ones the industry originally tried to put in place.

[gopnick]

This is a very, very good thing. Pandora is looking more and more sustainable.

[rudestar]

Does this mean they will be streaming outside the states?

[kelmon]

Here's hoping that they can recommence an international service again, although I have recently discovered that I can access Pandora again at work, presumably due to our proxy server's location.

[dascha1]

There was a huge jump with agreements and the US Govt. from several Internet Radio services over the last two years. Pandora is just the "mediabroker" solution for now...

[portvista]

I listen to Pandora on my Palm Pre - but haven't heard or seen any ads. I'm hoping I'll be able to login somewhere and see a list of songs I rated so I can buy them on Amazon.

[CharlieStubs]

This hardly constitutes increased sustainability for Pandora. To start, its definitely not "Internet Radio" under such a deal, as I would challenge anyone to find a Radio that only operates for 80min per day before asking "Please deposit $?.?? to continue listening". Obviously Pandora is dealing with a different set of problems than traditional Radio, but getting nickel and dimed for listening an hour and a half a day is absurd.

Also they're 10% estimate on affected users is so dubious that I can only assume it's a PR ploy. If you listen on your commute daily, and then even listen moderately on the weekend, you're going to hit your limit (assumes 90 minute round trip commute, which isn't unreasonable). You can no longer listen at work unless its just on coffee break, and obviously they know they're users listen more than 1 hour at a time, since they're subscription service acknowledges that users listen for up to 5 hours straight. Lets also forget about the entire college market, because I'm soooo sure that no one in college listens to Pandora while studying or writing papers.

This is simply going to end up being another service stifled in time by the music industry solely because it can identify individual users, and that's just blood in the water for that bloated shark. Of course you don't need an account to listen, but if you're sharing your internet through a router and they rely soley on IP you're completely out of luck there too.

This isn't a move towards sustainability, this is the first step towards a stagnant dimise. Expect in 8-12 months for there to be a further change to charges ($1 for 60 hours/month, $5 for 300 hours/month, $60/year subscription etc).

Basics:
40hours / month = 80 min/day =~ 20 songs per day == Way below average radio listeners intake

Time to cancel my sub and look for better alternatives.