CHIRP: The Chicago Independent Radio Project

Julio Perez writes

Pandora May Be Pulling The Plug Due To Increasing Royalty Rates

It’s becoming clear that the crunch is on to remove the influence Web radio is having on the music industry. The promotion and distribution channels have been disrupted, and the recording industry is making every effort to regain control, so they can peddle homogeneity in a medium that is anything but. The RIAA has been at it for a while and it looks like the disproportionate fees levied against Webcasters is beginning to effect one of the more popular Webcasting services around.

Because of the increased royalty rates going into effect next year, fans of Pandora may find their personalized radio stations shut down as the fees begin to reach nearly 70 percent of Pandora’s projected revenue. The per song royalty rates, according to a ruling by the Copyright Royalty Board, have increased from 8 cents in 2006 to 14 cents in 2008, and is set to increase an additional 4 cents starting in 2009. This is an immense cost for a service like Pandora, which allows for hundreds of thousands of songs to be played simultaneously, unlike traditional radio where one song is played at any given time. 2009 was slated to be the first year Pandora would rise above operating costs, but due to the increased royalty rates pushed through by the RIAA, Pandora founder Tim Westegren has been quoted as saying, “we’re approaching a pull-the-plug kind of decision.”

SoundExchange, a spinoff of the RIAA, supports the higher royalties for Internet radio, because they believe musicians deserve a bigger cut of Internet radio profits. This is a little disingenuous, considering they’re so concerned with this issue, that they seem to have a problem finding artists they owe money to. Of course, if they can’t find these artist to pay them, SoundExchange, keeps the money for itself.

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