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Enjoy Pandora Radio while it lasts August 18, 2008

Posted by Jill (@bonnjill) in Fun stuff, Random musings.

Pandora Radio may be pulling the plug soon due to Internet radio royalty demands from SoundExchange. SoundExchange is a non-profit performance rights organization that collects royalties on behalf of sound recording copyright owners (sometimes artists but usually the big-time labels) and featured artists for non-interactive digital transmissions, including satellite and Internet radio.

According to arstechnica.com, “Despite being one of the most popular Internet radio services, [Pandora] still isn’t making money, and its founder, Tim Westergren, says it can’t last beyond its first payment of the higher royalties.” That’s sad, because I have been turned on to several new groups and artists through Pandora and even recently attended a concert by “Over The Rhine” because I enjoyed some of their songs through Pandora. I wrote about Pandora back in June in a post about music in the workplace. I for one would pay to make sure they don’t close their site, so hopefully the people at Pandora will reengineer their business model to fee-based accounts.

For those of you who aren’t familiar with Pandora Radio, it is part of the Music Genome project. The Music Genome project is “the most comprehensive analysis of music ever undertaken.” The folks at the Music Genome project have been listening to music, one song at a time, studying and collecting literally hundreds of musical details on every song – melody, harmony, instrumentation, rhythm, vocals, lyrics … and more – close to 400 attributes. Pandora then plays songs that have similar attributes and interesting musical similarities to your chosen band or artist.

Most of you overseas readers probably don’t understand why this is such a big deal to U.S.-based companies, since foreign radio stations have always paid fees for public performance of music. Let’s just say that no one likes change, and this presents a big change to the status quo in the United States. Unlike European countries and other countries around the world, the United States did not collect payment for public performance of artists’ work prior to 1995. Users of music, the digital music service providers, freely performed these works at will, without paying the owners of those recordings or the featured artists who performed the songs. The Digital Performance in Sound Recordings Act of 1995 and the Digital Millennium Copyright Act of 1998 changed all that by granting a performance right in sound recordings. As a result, copyright law now requires that users of music pay the copyright owner of the sound recording for the public performance of that music via certain digital transmissions. Conventional radio stations don’t pay these fees yet, but that should change soon.

Most Internet radio stations like Pandora offer their services for free, or they offer accounts with more features at incredibly cheap prices. SoundExchange was able to initiate a massive (and retroactive) royalty hike on Internet radio stations by 2010, imposing per-user fees for each song of an estimated 2.91 cents per hour per listener—far higher than the 1.6 cents that satellite stations would pay. Most Internet radio stations won’t be able to afford these fees, and it smacks of favoritism and back-room negotiations. SoundExchange, on the other hand, argues that Internet radio stations could do a lot more to increase their revenue, become profitable, and pay their fees. It should be interesting to follow the developments over the next year or two.

Edit, 2:30 PM:
For an interesting take on things from musician and streaming radio channel owner David Byrne from the Talking Heads, click here. He is vehemently against the initiative and presents several different interesting arguments.



1. Luigi Muzii - August 18, 2008

I enjoyed Pandora for a long time, until, one fine day, four years ago or so, I was noticed that the service would be discontinued to users overseas. Copyright is weird matter: I’d bet artists would be happy to have their songs broadcasted overseas.

2. Michael - August 19, 2008

You could almost feel sorry for Copyright the way it is misused by everyone to hit the other guy over the head with 🙂 But seriously, whom does this disproportionate increase in royalties for internet broadcasting really help? As for Pandora, in my opinion they missed the boat by sticking to an unexciting, two-dimensional interface and a model with minimal interaction when, for example, last.fm re-invented itself over and over again with a multitude of social networking functions. So maybe high royalties don’t really shore up CD sales – and don’t automatically lead to the demise of internet broadcasters? But what about the group least talked about, the artists? Do high royalties for internet broadcasting help them?

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