Is Pandora about to hit the rocks... again? The creator of customized radio stations is struggling against increased internet royalty rates on recordings, and pleading its case in Congress. "We're approaching a pull-the-plug kind of decision," Pandora founder Tim Westergren recently told the Washington Post.
Pandora has already closed shop outside of the United States based on licensing issues, a reflection on the confusing patchwork of international rights. But the discussion over US-based royalties is now front-and-center, and increased royalty demands are putting pressure on business models and structures. Pandora employs a small army of listeners to classify every song, and the service dynamically generates thousands upon thousands of stations. Other recommendation models employ automated affinity engines, arguably a less effective approach, though inarguably a more cost-effective one.
The changes, issued by the Copyright Royalty Board (CRB) in July of 2007, raise royalties from $.0008 per song per listener in 2006, to $.0019 by 2010. Now, the question is whether providers like Pandora can forge a middle ground with SoundExchange, which manages recording rights for non-interactive, digital formats. "Most of the rate issues have not been resolved," relayed Representative Howard Berman (D-California). "If it doesn't get much more dramatic quickly, I will extricate myself from the process."
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