Internet radio service Pandora on the brink according to founder. Image: Mykl Roventine/Flickr.
The prospects for Internet radio have taken another potentially crippling gut punch this week following news that leading online radio service Pandora could well be on the cusp of closing its virtual doors.
According to Pandora founder Tim Westergren, the growth of digital media is undermining the very existence of Pandora, a creation of the Music Genome Project.
Speaking to the Washington Post, Westergren noted that the increasing popularity of digital media is also leading to an increase in instances of copyright infringement, which is seeing Internet media companies such as Pandora more actively targeted for their services.
“We’re approaching a pull-the-plug kind of decision,” said Westergren. “This is like a last stand for Webcasting.”
Compounding any sense of impending doom for Pandora, and other similar media services, Westergren said that the recent doubling of royalty payments for copyrighted songs has also contributed to mounting operational pressures.
Westergen outlined that, although estimated revenue for Pandora in 2008 sits at around $25 million USD, some 70 percent of that figure will likely be lost to royalty payments.
While certainly not a guarantee of Pandora’s ongoing survival, U.S. Rep. Howard Berman (D-California) is reportedly striving to prevent the demise of online media outfits, including Pandora, by attempting to hammer out a decrease in royalty payments with SoundExchange, which represents the record labels and their contracted artists.
In 2007, the Copyright Royalty Board decreed that airplay royalties connected to online media on a per-song, per-listener rate should be doubled. Those rates currently stand at 8/100 of a cent and are expected to jump to 19/100 of a cent in 2010.
In a move to help prop the ailing service, Westergren said that Pandora will soon begin running brief sponsorship advertising in its audio feed, although he was keen to point out that no adverts will be run between songs. Presently, Pandora creates its revenue through adverts posted to its Web site.
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