The Washington Post looks at webcaster Pandora‘s imminent demise in spite of its popularity (“about 1 million listeners daily” and “40,000 new customers a day”): Giant of Internet Radio Nears Its ‘Last Stand’.
Thanks to the music inudstry’s lobbyists, web radio has to pay twice as much per song as terrestial radio, which only pays a publishing royalty to the songwriters and publishers. In addition to that, web radio also has to pay the record label a “performance royalty” for the master recording:
Traditional radio pays nothing in performance royalties, though SoundExchange is pressing to change that. Satellite radio pays 6 or 7 percent of revenue. And then there are webcasters, which pay per song, per listener.
Using listener figures from Arbitron for XM Satellite Radio, it is possible to estimate that the company will pay about 1.6 cents per hour per listener when the new rates are fully adapted in 2010. By contrast, Web radio outlets will pay 2.91 cents per hour per listener.
Gee, that hardly seems fair. These industry lobbyists are the same people kicking themselves for “allowing” MTV to promote their products (i.e., albums) without paying them a royalty for airing promotional videos.
More insanity after the jump…
Other interesting tidbits:
• “The Copyright Royalty Board last year decided that the fee to play a music recording on Web radio should step up from 8/100 of a cent per song per listener in 2006 to 19/100 of a cent per song per listener in 2010.”
• “SoundExchange, the organization that represents performers and record companies, said it supports the higher royalties for Internet radio because musicians deserve a bigger cut of Internet radio profits.”
• “SoundExchange officials argue that because different media have different profit margins, it is appropriate to set different royalty rates.”
• Pandora founder Tim Westergren says: “The moment we think this problem in Washington is not going to get solved, we have to pull the plug because all we’re doing is wasting money.” […] “We’re funded by venture capital,” he said. “They’re not going to chase a company whose business model has been broken. So if it doesn’t feel like its headed towards a solution, we’re done.”
• Responding to claims that “Internet radio stations have done too little to make money from playing their songs,” Westergren says, “When we have our board meetings, the central topic is the revenue trajectory, not how happy our users are.”
Good luck with that. You and your board might want to keep in mind that unhappy users will quickly find somewhere else to spend their time and attention…