Internet Radio’s Last Stand

Posted on August 16, 2008

It may really be this time. After a reprieve, time seems to be the enemy of Internet radio stalwarts like Pandora.

Pandora is one of the most popular Web radio services, with about 1 million listeners every day. It’s a really great idea that I have used since its very beginning. If you’re not familiar, it’s a project that allows you to create a radio station suited to your own tastes. Select an artist you like and they will play similar artists as well. As you give thumbs up or down to the music you hear, you refine your station to be exactly as you like. Like another style of music? Just start another station. Great stuff.

It would be sad to see it go but it may be on the verge of collapse, according to its founder, and so may be others like it. “We’re approaching a pull-the-plug kind of decision,” said Tim Westergren, who founded Pandora. “This is like a last stand for webcasting.”

The transformation of words, songs and movies to digital media has provoked a number of fights between the owners of copyrighted works and the companies that can now easily distribute those works via the Internet.

Last year, an obscure federal panel ordered a doubling of the per-song performance royalty that Web radio stations pay to performers and record companies. OTA radio pays no such fee. Satellite radio pays a fee, but but at a much smaller rate.

As for Pandora, its royalty fees this year will amount to 70 percent of its projected revenue of $25 million, Westergren said, a level that could doom it and other Web radio outfits.

A last-minute deal is being brokered but the parties are so far apart a deal doesn’t seem to be in the offing.