Report: Fees may sink Pandora soon

Tim Westergren, the founder of popular Web radio start-up Pandora, has said in an interview with The Washington Post that his company may be close to a shutdown.

"We're approaching a pull-the-plug kind of decision," Westergren said in the article, published Saturday. "This is like a last stand for webcasting."

The problem, he explained, is last year's royalty hike for Web radio, which makes it extremely expensive for an independent start-up to stay afloat in the business. The royalty increase will eat up 70 percent of Pandora's $25 million in revenue, Westergren said.

SoundExchange, an organization comprising representatives from record labels and performers, believes that Internet radio owes a bigger cut of profits than traditional radio does. Activist groups like the SaveNetRadio Coalition, along with start-ups like Pandora, have fought the fee hikes.

A few Web geeks weren't convinced that Pandora's situation is as dire as Westergren says it is. "I love Pandora like my old baseball glove, but they can only pull this Chicken Little move so many times," marketing consultant Brian Oberkirch posted to Twitter on Monday morning.

But Westergren assured in the Post interview that he's not exaggerating. "We're funded by venture capital," he explained. "They're not going to chase a company whose business model has been broken. So if it doesn't feel like it's headed towards a solution, we're done."

[pjhenry1216]

SoundExchange should be shutdown or come under much more regulation. It should be forced to give the same royalties to everyone. If people have to deal with this company *by law*, it should come under much more regulation. Yet, the labels have the politicians in there pockets, so doubt that'll happen.

[Renegade Knight]

Very true. If it acts like a publicly regulated monopoly (you have to deal with them and have no choice) they should be regulated like a publicy regulated monopoly. Maybe like a music utility.

[The_happy_switcher]

The record industry, like Microsoft, needs to die an agonizing death.

[ev61]

Thank you for the relevant and insightful comment...

[kojacked]

Wake up and smell the coffee: Microsoft IS the record industry. Why do you think they put all of that DRM in Vista? If you shut them down world peace will finally be achievable.

[Seaspray0]

Hmm... the record industry, of which itunes is a part of, needs to die an agonizing death? How insightful, macboy.

[amweiss]

On what basis to the Web geeks doubt what Westergren has said? Just saying that they think this is Chicken Little isn't enough.

[bjglav492]

really, some random dude posts a twitter and that warrants a point of view and quote in the story. I expect more when I click through to read a story.

[samjemb]

Historically, the record companies have made enormous profits on the backs of hard working performers, who were never paid for their work until ALL costs (includiing engineering, recording, manufacturing, distribution, advertising and marketing) were fully repaid to the record companies. Unless an artist achieved a truly remarkable level of success (as measured by large numbers of sales of his or her recordings), he or she never saw a cent.

Now the same group of people seek to strangle the powerful distribution ability of the internet until they can wrangle all the profits for themselves. It seems that the more things change the more they stay the same.

The loss of something so wonderful and innovative as Pandora would be truly tragic. I sincerely hope some workable solution can be reached that will permit Pandora to stay alive and continue to provide wonderful music to those of us who truly appreciate it.

David S. Bunin

[DaveMcLain]

I don't quite understand the record industry's stand on this issue, raising their fees to play the songs, why? Doesn't it work like this? Play the song and people hear the music and buy the record. It seems as though a service like Pandora which pinpoints a target audience with each listen would be a godsend to the music industry......

[HokieMatt]

This would be one of the saddest days if Pandora closes shop. I remember discovering the site a few years back and became instantly hooked. It's almost all I listen to these days and have actually discovered quite a few new artists that I really like. I heard Tim speak at Virginia Tech and he is a very smart man and it's a shame if he's great site gets axe because of the greedy record industry.

The record industry's continuous actions will cause me to continue my boycott to never give them a dime of my money.

[rkminc]

We recently launched an internet radio platform called Highnote. Listeners discover new music on highnoteradio.com, and independent artists have free distribution with paid promotion opportunities. At the core is the promotional platform we're building which is designed specifically for streaming music. Labels and independent artists get promotional exposure for their new music in the most natural way ? played directly after artists that are similar. Ex: I am an artist that cites Coldplay and U2 as influences, I can get my track played into streams after users hear songs by Coldplay and U2. As an artist trying to build a fan base, I only pay for qualified traffic to my web site or MySpace page, where I sell music & merchandise directly.

The crucial thing here for listeners is relevancy -- we provide enough popular songs in streams to keep the listener engaged. And we quickly stop playing promoted music if people don't like it (though it happens less often than you'd think, because the promotions are so targeted).

feedback welcome, we're at http://www.highnoteradio.com

[sadchild]

just signed up to see what it's like. i can track where people came from so i'll see if drives some traffic. thanks.

[proudmonkey]

I have been using Pandora for quite awhile now It has decreased my use of "pirating music" drastically. So my question to the labels is what is better money or no money?

[sadchild]

the record industry is determined to kill itself. apparently the latest way for them to commit suicide is to overcharge companies trying to start a new way to generate revenue. so which is better? 10 cents per song x 10 million plays? or 70 cents per song x 0 plays because nobody can afford it? do the math.

[Miker99]

I have bought probably 30 MP3s from amazon.com in the past three months, from artists I would have never even have heard of without Pandora. I will be sorry to see it go, and I would be willing to pay a small subscription fee. The product and technology is superior to what I had on Rhapsody, when I subscribed to that.

[HlLLARY CLITON]

if they close Pandora and the like I bet there will be an increase in music pirating