pandora page
Increase royalties could drive top US internet radio station out of business

US legislation governing the royalty payments required from internet broadcasters could signal the end of one of the USA's most popular web radio services.

Pandora, which has around a million listeners daily, is one of the top 10 iPhone applications Stateside and is attracting 40,000 new customers a day. But it's on the brink of pulling the plugs, simply because new legislation means the station could end up paying record companies about $17m (around £9.3m) a year, which would be 70% of its projected revenue.

Last year the US Copyright Royalty Board decided to increase the fee to play a recording on web radio should increase from 0.08c to 0.19c per song per listener. By contrast, conventional radio stations pay nothing in performance royalties, and satellite radio stations about 6-7% of revenue.

The situation for web stations like Pandora is made worse by the fact that, rather than playing one song at a time, as conventional radio stations do, the web station's technology allows listeners to create their own radio station, so hundreds of thousands of songs could be streaming simultaneously.

The station's Music Genome Project can automatically create playlists based on listener's initial choices, thus tailoring the output to each user's tastes.

More after the break

It's expected the Copyright Royalty Board's decision could have have even greater financial impact on smaller stations, some of which could find themselves facing bills amounting to twice or three times their revenue.