Pandora.com Warns of Closing Down to Royalty Rates

Pandora is one of the nation's most popular Web radio services, with about 1 million listeners daily. Its Music Genome Project allows customers to create stations tailored to their own tastes. It is one of the 10 most popular applications for Apple's iPhone and attracts 40,000 new customers a day. Yet the burgeoning company may be on the verge of collapse, according to its founder, and so may be others like it. 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. Traditional radio, by contrast, pays no such fee. Satellite radio pays a fee but at a less onerous rate, at least by some measures. 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. This week, Rep. Howard L. Berman (D-Calif.) is trying to broker a last-minute deal between webcasters and SoundExchange, the organization that represents artists and record companies. The negotiations could reduce the per-song rate set by the federal panel last year.
http://www.washingtonpost.com/wp-dyn/content/article/2008/08/15/AR2008081503367.html