Digital Media

Pandora, with new Facebook, Twitter, and Gift sharing features.

(Credit: Screenshot by Harrison Hoffman/CNET)

Pandora on Wednesday announced the arrival of some new sharing features for the service. In the past, you have been able to share Pandora stations, but you were forced to do it via e-mail instead of taking advantage of one of the modern social networks. Now, Pandora is enabling station and song sharing via much more efficient means: Facebook and Twitter.

These features work pretty much exactly how you would think they would. Clicking on the Facebook icon pops out a Facebook window, allowing you to share either the current song or station. The Twitter integration works in much the same way, enabling you to tweet out a link to the current song or station. When you click on the station link that someone has shared, it whisks you away to their Pandora station and lets you listen. However, the song links only go to a landing page that gives you a 30-second preview and an option to create a station based on that song. Oddly, this page does not give the user the "Buy from Amazon/iTunes" option that Pandora's main app features.

In addition, Pandora is bringing more attention to its station-gifting feature. This feature basically allows users to create an entirely new station, pair it with an eCard and send it off to someone. Pandora is essentially trying to create the modern version of the mixtape. This feature has been around for a little while, but it has gained little attention to this point. The more prominent placing in Pandora's music player may change that.

These new sharing features should boost usage of Pandora. Tapping into the previously untouched power of Facebook's social graph and Twitter can only be a good thing. Pandora is just coming off of reaching an agreement on new royalty rates for music this summer and it's working toward its goal of being profitable by the end of the year. They're also facing some stiff competition from companies like Slacker. Pandora still has a long road ahead, but opening up its service to sharing on Facebook and Twitter is definitely a step in the right direction.

Three years ago this month, the Financial Times and The New York Times chronicled the emergence of an untried but promising new digital-music service: SpiralFrog.

Some of the hurdles that contributed to SpiralFrog's spiral out of the sector are the same confronting former rivals.

The start-up would offer music free of charge to consumers and attempt to hand the bill to advertisers. Since then, we've seen a dozen companies make names for themselves by offering their own twist on the ad-supported music model, including MySpace Music, Imeem, and Pandora. But regardless of how anyone has tweaked it, not a single service in the still-nascent sector has proven that it knows how to offer consumers a compelling free-music service while providing advertisers an effective way to deliver their messages.

Music fans generally refuse to pay to listen online and resent on-site advertising. The hard truth is that to this point, ad-supported music as a standalone business has failed.

Ruckus and SpiralFrog have closed their doors. Imeem faced a financial crisis earlier this year, until receiving new funding from investors and price concessions from the music labels. A year after Qtrax obtained licenses from all four of the top recording companies, the company appears to be struggling to pay its bills and has yet to launch.

In May, CNET News reported that MySpace Music's performance has underperformed. Several music sites have overhauled their business models (Lala) or are trying to do so (iLike).

Pandora's popular iPhone app, meanwhile, has helped spur user growth, but the company has also opted out of ad-supported music for the site's heaviest users. The company said last month that those tuning in for more than 40 hours a month must pay 99 cents to continue listening.

And if you're waiting for the Swedes, in the form of white-hot music service Spotify, to come charging over the hill to show us how to make the model work, you needn't bother. Three industry sources told CNET News last week that the service--expected to debut in the United States next year--is struggling to convert users into paying customers. Just like others on this side of the Atlantic, Spotify hasn't figured out how to make money.

CNET News has recently completed a two-month examination of SpiralFrog, the now-defunct download service that was among the pioneers of the ad-supported model. The review provides an unprecedented view of the many challenges facing companies in this sector. SpiralFrog's tale sheds light on the kind of rates advertisers are willing to pay and the licensing fees the top music labels charge. None of it is very promising.

There's no doubt now that the much-hyped SpiralFrog was never among the front-runners. The service offered music from only two of the four top recording companies. Users couldn't download SpiralFrog's tunes to their iPods. And documents show that the start-up spent millions of dollars on marketing but never attracted a loyal following of significant size.

There may be a temptation to dismiss SpiralFrog's problems as unique to the company. That would be a mistake. There's no question that some of the same factors that stymied SpiralFrog are bearing down on many of the company's former rivals. "This version of ad-supported model is certainly on life support," said Mike McGuire, an analyst at research firm Gartner. "I think we can say this round didn't quite work."

Migration to downloads
One sign that some players in digital music are losing faith in the ad-supported model is the rise in companies looking to sell downloads, according to one music industry executive. "That's become the fallback position," the source said.

A copy of a $1.8 million bounced check written by Qtrax to Oracle, which filed a breach of contract and copyright lawsuit last month against the yet-to-be-launched music service.

(Credit: Screenshot by Greg Sandoval/CNET)

All four of the major music labels declined to comment for this story.

Imeem, which has mostly focused on streaming ad-supported music to users' PCs, has recently begun testing a download store. Music industry sources told CNET News last month that iLike, which powers Facebook's most popular music service, was in talks with the major record companies over licensing downloads.

For two years, Imeem has posted links to Apple's iTunes and Amazon.com's MP3 service on its site to enable visitors a means to buy songs. MySpace Music, YouTube, Pandora, and Spotify do the same. But Imeem is testing how effectively it can sell a limited number of tracks from Warner Music Group and several independent labels directly to consumers.

Selling downloads directly, rather than linking to another retailer, is more lucrative. A music site that sells downloads can make 30 cents from direct sales rather than the 5 cents that the so-called affiliate partners pay, according to an industry source. The trick for any upstart download store is to convince customers of Apple's iTunes and Amazon's MP3 service--by far the leading download stores--to try a new outlet.

Nonetheless, the behemoth record labels are willing to work to help ad-supported sites survive. Imeem is the poster child for how the labels have changed their approach to these services. Founded in 2004, Imeem came very close to running out of money until it found new funding and also negotiated better licensing deals with the labels earlier this year. Some of Imeem's rivals asked and received similar concessions, industry sources said.

That hasn't stopped the complaining, however. The people who run digital-music stores continue to quietly argue that licensing fees charged by big record companies are still too high for stores to eke out a profit. Music industry insiders say it's not their fault that the start-ups have failed to win over advertisers. What are they supposed to do--give their content away? That won't happen, executives say.

Overpaying for music
CNET News' review of SpiralFrog showed that in 2006, SpiralFrog agreed to pay $3.2 million to Universal Music Group, the largest of the top four recording companies, in up-front fees. Documents indicate that in 2008, SpiralFrog set aside $3.5 million to license music from EMI, the smallest of the major labels. That deal triggered a "most favored nation" clause in Universal's contract, and SpiralFrog ended up paying an additional $1 million to Universal.

From a SpiralFrog June 2008 expenditure list. Note: SpiralFrog had no licenses with Warner or Sony. Figures represent amounts the start-up expected labels to charge.

Although SpiralFrog managers never secured deals with Sony Music Entertainment or Warner Music Group, the music service budgeted $5 million and $3.3 million, respectively, to acquire licenses from those services, records show. Those figures were all minimums. Under the agreements reached with Universal and EMI, had SpiralFrog made revenue above those minimums, the company would have been required to split that revenue 50-50 with the labels.

By the time SpiralFrog compensated the labels and music publishers, the company's managers figured that 66 percent of their revenue went to the music industry, records show. SpiralFrog's deal with the major labels was different from those negotiated by most music-streaming Web services, which pay penny-per-play rates. Their agreements are to pay a cent, or some fraction of a cent, each time a song is played.

It appears that it made little difference whether the record companies got their money before or after a sale. The rates they charged forced ad-supported companies to generate big ad revenue in order to cover costs.

SpiralFrog, for its part, never came close to covering costs, documents show. The start-up lost more than $26 million in 2008.

Advertisers are simply unwilling to pay the music sites a premium rate. In order to charge advertisers $10 for 1,000 impressions, ad-supported sites must operate their own sales teams, which is expensive. In SpiralFrog's case, the company's salespeople were successful at signing a few marquee advertisers, including McDonald's and Microsoft, but much too often, the company found itself selling excess ad inventory through remnant ad networks, which typically pay 50 cents or less for 1,000 impressions.

Advertisers aren't willing to give the ad-supported sites top dollar because they know that people aren't necessarily staring at a computer while listening to songs online. Instead, they tend to check e-mail or Facebook, do homework, eat dinner, or browse the Web in other browser tabs. In contrast with radio, Web listeners have become accustomed to music without audible ads embedded into the streams--and they don't want those ads, according to Gartner's McGuire.

Another gripe that advertisers have is that many ad-supported sites don't reach big enough audiences. Mel Schrieberg, SpiralFrog's former CEO, said SpiralFrog couldn't get in the "tier 1" advertising door with fewer than 5 million users. To generate this kind of traffic, SpiralFrog spent $11 million in 2008 on search engine and affiliate marketing, which gobbled up the little revenue the company was able to generate.

But Susan Kevorkian, a digital-music and mobile-entertainment analyst at IDC, points out that a large audience doesn't mean instant success. Although MySpace Music has access to the social network's shrinking but still large audience, she said the service still "hasn't performed to industry expectations."

Is there any hope?
One bright spot is that some investors are sticking with the sector.

In addition to Imeem, Spotify and Pandora found new funding. Investors including British venture capital firm Wellington Partners were part of a $50 million round of financing for Spotify, according to the Financial Times. And Pandora last month announced that it had raised $35 million of additional funding.

Ali Partovi, iLike's CEO, argues that the ad-supported model works for music, but not when you're giving songs away.

"We've built a self-sustaining ad-supported business--positive cash flow over the past eight-month period," Partovi said. "That's with only one full-time ad salesperson. What's our secret? It's simple: we're not trying to help consumers get unlimited music without paying for it. Instead, we're focused on music discovery. We deliver all the other things that music consumers love without risking a lawsuit or paying high royalties."

That may be true, but iLike is among the companies discussing downloads with the music labels.

Click the image above to read the lead story of our series on SpiralFrog. Stories on SpiralFrog's internal strife and customers' private information will appear Tuesday.

Matt Graves, Imeem's spokesman, said his company is trying to be innovative and not solely rely on traditional online advertising, such as on banners and display ads. The company is trying to mix things up with in-stream audio ads and custom-tailored campaigns. The music service recently promoted a download giveaway from Wal-Mart Stores and offered users a chance to remix songs from artists such as rapper Flo Rida.

"If it's all about displays, then users will get ad-blind," Graves said. "We're enabling advertisers to do a deep integration."

IDC's Kevorkian agrees that until now, ad-supported music has failed, but she sees some possibilities.

"This model has some flaws that need to be addressed before it works as a standalone model," Kevorkian said. "That said, there's a possibility that it could be deployed in conjunction with a hybrid paid model to help generate revenue so that the music provider isn't solely dependent on ads."

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.

Tim Westergren

(Credit: CNET News)

Internet radio got a break Tuesday when the sector reached an agreement on streaming-music royalty rates with SoundExchange, the group that collects royalties on behalf of artists and labels.

The two sides announced the deal, which comes after more than two years of negotiations, political maneuvering, and fans pleading with lawmakers to save Webcasting. It should be noted, however, that Webcasters are still at a disadvantage when competing with traditional broadcast radio. Over-the-air stations aren't required to pay royalty rates to artists or labels.

Steve Marks, an executive vice president for the Recording Industry Association of America and one of the people who helped close the deal, said the settlement is proof that the music industry wants to partner with technology firms.

"Supporting new business models through innovative licensing agreements is critical to the future of our industry," Marks said. "We are pleased to have found an alternative in the hope of avoiding costly litigation in favor of building partnerships."

The agreement calls for large ad-supported radio services, such as Pandora, to either share 25 percent of revenue with the music industry or pay a per-stream rate of 0.08 cent retroactive to 2006, whichever is greater. That rate will increase until reaching 0.14 cent in 2015.

Sites that generate less than $1.25 million in revenue must pay 12 percent to 14 percent of sales for streaming rights.

Lower rates were vital to the survival of Internet radio stations, Tim Westergren, Pandora's founder, said in September. The Copyright Royalty Board set a performance rate at 0.19 cent but Webcasters argued that the rates would drive them out of business.

But here's the rub: Pandora's heaviest users will now have to pay, according to a story in the blog All Things Digital.

Westergren told the blog that Pandora will begin charging listeners who use the service for 40 hours a month to pay $0.99 to hear more music after hitting that mark.

"There's a very small percent of listeners who are using it a ton," Westergren told the blog. "That's great, except when you're paying per song."

As for why Webcasters must pay these royalties and traditional broadcasters do not, that is at the center of a struggle going on now on Capitol Hill. The music industry is trying to get the Performance Rights Act passed in Congress, which would force over-the-air broadcasters to pay the fees, while the National Association of Broadcasters is pushing its own legislation designed to shield it from the royalties.

Dennis Wharton, an NAB spokesman, said that the Webcasters are subscription services that are trying to get people to pay, just as Pandora is doing now. He also says that traditional radio is a huge promotional tool for the major music labels and Web radio's following is still tiny.

"I think there is big recognition that the sheer number of people who listen to over-the-air radio generates a massive amount of revenue for the record labels and artists," Wharton said. "If you added up the competition, say Pandora, or Live365, we would dwarf them."

Pandora is a great music-discovery service, so it's only natural that independent bands would hope to get their music placed on it. Unfortunately for them, Pandora just made that a little harder--and a little more expensive.

As I first saw on the Digital Audio Insider blog a couple weeks ago, Pandora recently changed its music submission process, and is now accepting solicitations only from bands who have a physical CD for sale through Amazon.com. That requires the artist to manufacture a CD with proper album art and bar code, which is much more expensive than creating a bunch of MP3s, and to pay Amazon $29.95 a year to participate in the Amazon Advantage program; Amazon then takes a 55 percent cut of the list price of the CD.

This shouldn't hurt too many artists--serious musicians want their CDs to turn up in a search on the world's largest retailer, and probably have a relationship with Amazon anyway. But you were planning on using CD Baby or another site exclusively, or hoping to save money with an online-only release, don't count on Pandora as a marketing mechanism for your music.

A friend pointed me to Sourcetone Interactive Radio, which offers a sort of New Age twist on Pandora. Sourcetone's main gimmick is a colorful mood wheel--select your mood by clicking on the wheel, and the service will begin streaming appropriate music.

There's a lot of verbiage on the site about how Sourcetone is basing its selections on scientific research, including some conducted by a team at the Beth Israel Deaconess Medical Center, but so far there's only one published research paper on the site. The scientific angle is not particularly interesting to me--any music fan knows that music can affect mood, and mood can affect health, so scientists are just catching up with human intuition.

Sourcetone's worthwhile because of the excellent music selections--mostly long instrumental tracks in genres like classical, avant-garde jazz, traditional, or ambient, including better-known artists like fusion group Shakti (which features guitarist John McLaughlin) and Yo Yo Ma, as well as more obscure independent acts like Married Couple. (I'd never heard of them and was pleasantly surprised.) They even threw in one of my favorite Otis Redding songs, "I've Been Loving You Too Long" under the Melancholy category. The sound quality was also surprisingly good for a streaming audio site.

Don't expect it to cure any diseases, but it might help you get through the day and turn you on to some interesting new music in the process.

I'll readily admit that I'm not in the target audience for the new SlotRadio MP3 player from SanDisk, which became available last week.

The $99 device comes with a microSD card containing 1,000 songs, selected by Billboard editors from top-charting radio hits of the last 40 years or so, arranged in seven playlists--rock, country, hip-hop, and four others.

You can't edit or rearrange the playlists, you can't move the songs to your computer or any other device, and the only way to get new songs is by buying new 1,000-song cards for $39.99 apiece.

For a music control freak like me--I used to be the jerk at parties who'd secretly rifle through the host's CD collection looking for something I liked more than what was playing--turning my audio programming over to somebody else isn't easy.

There's a wee tiny rock band in there, and they're playing my favorite Steely Dan song.

(Credit: CBS Interactive)

But I got a chance to play with the SlotRadio today, and there's something refreshing about its simplicity. I took it out of the box while sitting on the bus and was listening to music in less than 30 seconds.

There's no software to install, no USB cable to plug in, no CDs to rip, and no need for the instruction booklet. It's an MP3 player for people who don't know what MP3s are--and don't really care--but just want to rock out to some good tunes without carrying their entire CD collection around in their car.

While I agree with CNET's Jasmine France that the sound quality is only mediocre, the bigger problem is the mainstream, middle-of-the-road selections chosen by Billboard.

SanDisk had to start somewhere, and Billboard is one of the biggest names in the biz, but each playlist sounded like a heavily audience-tested radio station programmed by some anonymous machine in a building in New York. That is fine...but if I wanted the risk-averse sensation of radio, I'd just turn on the player's built-in radio. I ended up using the skip button quite a bit.

As I said when I first heard about SanDisk's SlotMusic strategy, the format will succeed only if SanDisk quickly signs up some more eclectic curators. I'd gladly pay $40 for 1,000 blues songs curated by Buddy Guy, or 1,000 reggae and dub tunes collected by KEXP's Kid Hops, or the top 1,000 songs of the year as chosen by the editors of Pitchfork.

Better yet, what if SanDisk teamed up with Pandora? The target audiences seem almost identical: music lovers who can't find a radio station that matches their taste, and don't have the time or motivation to hunt down and buy (or steal) a lot of music themselves.

Users could order customized cards based on their musical profiles or Pandora stations. They'd have to be created on demand, which would be more costly than mass-producing the same card thousands of times, but Pandora already has the algorithms and infrastructure to create customized radio stations on the fly, so how much more expensive could it be to rip 1,000 songs onto a microSD card?

Anyway, SlotRadio is an odd but interesting little device, and I hope that SanDisk gives it the chance it deserves by branching out into the niche markets in which music lives today.

Follow Matt on Twitter

SpiralFrog met its end just days ago, and already, operators of other ad-supported music services are rushing to put distance between their business models and that of the doomed site.

"The concept was good, but the management, board (not all), and execution were poor," wrote Robin Kent, the former CEO of SpiralFrog who went to work as an adviser to Qtrax, one of SpiralFrog's competitors. "It was obvious to anyone...it wouldn't survive."

What might encourage supporters to jump to the defense of ad-supported music services, which don't charge users to listen to music but support themselves through ad sales, is the undeniable whiff of failure floating around the sector. In the first three months of the year, SpiralFrog has followed Ruckus, the music service that catered to college students, onto the scrapheap.

Ad-supported music sites have been around for two years, and some have burned through lots of cash, but none has reported a profit. According to a letter sent to investors by SpiralFrog's attorneys last week, the company owed $34 million when it ceased operations on March 13.

Then there's the crumbling ad market. Even before ad money began drying up, questions lingered about whether ad-supported sites could generate high-enough ad rates to pay their costs, which include the hefty fees they pay to license music. Now, against this bleak landscape, comes a new threat.

Some label executives are questioning the value of offering the public music free of charge. For decades, a large number of people have believed that giving away music, such as playing songs on broadcast radio or handing out CDs at concerts, promoted music and helped boost sales. But now some in the music industry suspect that instead of promoting sales, ad-supported services are replacing them.

The problem appears to come down to a question of control. Broadcast radio for years served to introduce the public to new music. Radio was and still is a powerful music discovery tool, says Mike McGuire, a digital-music analyst for research firm Gartner. Only word-of-mouth recommendations drive more music sales, says McGuire, who is working on a forthcoming report on the topic.

But many ad-supported music sites are very different than broadcast radio. Traditional over-the-air radio enabled listeners to hear songs for free but gave them no control over when, or how many times, the song played. At Imeem, a social network that focuses on video and music, and YouTube, the Web's top video site, visitors can listen to songs in their entirety as many times as they want.

"There's nothing left to promote...this way," said a high-level music industry executive who wished to remain anonymous. "At what point do they stop promoting and start competing?"

(Credit: Greg Sandoval/CNET)

According to information supplied to CNET News by the music executive, who requested anonymity, a recent study showed that music purchases made by people who listen to three free-music sources fell 44 percent from the first quarter of 2005 to the third quarter of 2008. Over the same period, the purchases made by people who listened to four sources declined 49 percent.

The sources of free music included both traditional and new-media sources, such as broadcast and online radio, cable and satellite music channels, as well as TV and Web music video outlets.

There are plenty of questions that the data doesn't answer. For example, what were the buying habits for people that listened to two sources or one? Did they boost sales? That information wasn't provided. But what's important to music executives is that the data indicated that the more free music sources a person had, the fewer the number of purchases he or she made. That's not what the record companies want to see.

The source also said the labels are not giving up on sites like Imeem, Pandora, or YouTube. Nonetheless, this is likely one of the reasons why some recording companies are asking for higher fees in negotiations with digital services.

The thinking among some of the labels is that if ad-supported services are cannibalizing music sales, the record companies want licensing fees to cover the losses, the source said. The music services say they can't pay any more.

Matt Graves, an Imeem spokesman, acknowledged that his company's executives asked for and received a break on their licensing terms from some of the labels. That was before the economic meltdown. The labels are less willing now to cut similar deals, the music industry insider said.

Graves said this kind of thinking is short-sighted. He said ad-supported music has been the best defense against piracy. He said the labels should remember that Imeem and the other sites pay licensing fees and often share ad revenue with the labels. Peer-to-peer sites, he says, don't pay or share a cent.

"I think there is a hope in the music industry to turn back the clock," Graves said. "This is not 1999 anymore. There just isn't as much money as there once was in music. Imeem is not only sharing ad revenue but generating significant download sales. I understand their hopes. If my income dropped by 50 percent in four years, I'd probably be feeling the same way, but we're trying to help them understand the new reality."

McGuire from Gartner argues that a big part of the problem is that ad-supported services haven't figured out how to make money. He says they have struggled to charge advertisers an effective CPM, which, in Web advertising, stands for cost per thousand (page) impressions.

Michael Robertson, a well-known Silicon Valley entrepreneur, founder of MP3tunes.com, and record industry adversary, has long been critical of ad-supported plays. He says the economics just don't work because the sites must pay penny-per-play royalty rates to the major labels, and they just can't deliver enough ads at a high-enough CPM to cover the royalty fees, much less than the other costs of running a business.

He says the sites can't generate a high CPM because advertisers know that people often listen to the free music that YouTube, Imeem, and Pandora offer without paying attention to the ads. "People's ears may be engaged, but it doesn't mean their eyes are."

"What's stunning to me is that anyone is surprised about SpiralFrog," Robertson wrote to CNET. "The economics are very obvious to all in the know, but people keep pretending that the charade of ad-supported music works. It does not."

McGuire agrees that ad-supported sites must adjust their models but disagrees that they are without hope. He says that if word of mouth is still the best music-discovery tool, then social networks are places that "amplify word of mouth." He says his research shows that awareness that social networks offer music is still very low.

This means, said McGuire, that "there's a lot of room to make these things vibrant and relevant."

Few people know this but for a little while last year, the music-royalty rates that Web radio stations have complained about for years appeared to be behind them.

Pandora founder Tim Westergren

(Credit: CNET Networks)

In a midtown Manhattan law office last November 6, representatives from Webcasting companies and SoundExchange, the group that collects royalties for recording artists and labels, struck a deal "in principle," said sources familiar with the negotiations. The agreement was designed to restructure the royalty rates Webcasters have long said would decimate the sector.

But a week ago, came word that a final deal was never signed. The Digital Media Association (DiMA), the group that represents most of the largest Webcasters, including Pandora, Live365 and Yahoo, announced that the parties failed to reach an agreement. How could that happen? Both sides told members of Congress in September that they were close to a deal. In November, the blog All Things Digital reported a settlement was within grasp and quoted Pandora founder Tim Westergren saying "all the hard stuff has been done."

After interviewing multiple sources on both sides of the issue, the picture that has taken shape is that Webcasters blew a golden opportunity to reach an accord that would have given them much of what they asked for. What appears to have happened is that some in Webcasting were willing to play a game of brinkmanship with SoundExchange. At the very least, the actions of some larger Webcasters undermine their claims that they can't afford to continue for much longer without a settlement.

There is still a chance the two sides can come to terms. Talks are ongoing. But as it stands, time is quickly running out and nothing has occurred to indicate a breakthrough is near, according to sources on both sides. If a settlement isn't reached, its conceivable that some Web radio stations that legitimately can't afford to pay the performance fees set by the Copyright Royalty Board (CRB) two years ago may be in jeopardy. Representatives from SoundExchange declined to comment. Westergren did not return repeated phone calls.

Did Real want a deal?
There's no doubt who the music side blames for derailing the agreement.