Pandora Nearing 'Last Stand' Against RIAA Due To Excessive Royalties Fees

If you've read our App Reviews lately then you can probably guess that we are pretty big fans of Pandora Radio, and the internet-radio movement they've been a part of, but it's no secret that the RIAA and internet radio do not get along. So far they've been able to hold on despite the constantly growing mountain of fees and royalties, but they may be nearing the end of their rope.

For a long time the RIAA has been doing whatever they can to pile on fees and squeeze money from internet radio companies like Pandora. Last year, an obscure federal panel doubled the per-song performance royalty that internet radio stations like Pandora have to pay. This year Pandora's fees will amount to 70% of their projected revenue of $25 million, which Tim Westergren, Pandora's founder, says could mean the end for not only their company, but all of internet radio.

"We're approaching a pull-the-plug kind of decision," said Tim Westergren, who founded Pandora. "This is like a last stand for webcasting."

Their hardship is certainly not due to lack of demand for the service. Quite the contrary; the Pandora Radio iPhone app [iTunes link] that allows users to listen to customizable radio stations over the internet is among the top 10 most popular apps in the App Store, and brings in 40,000 new users daily.

However, despite their immense popularity, Westergren says that the RIAA's incredibly high demands are making business near impossible.

"We're losing money as it is," said Westergren, a former acoustic rocker. "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."

For a time there was a change of coming to a compromise between the parties involved. Earlier last week, House Rep. Howard L. Berman (D-Calif.) made an attempt to broker a deal between webcasters and SoundExhcange, the organization representing artists and record companies, but so far it has been to no success.

Part of what's so out of place is that the RIAA is targeting internet radio specifically. Traditional radio has in the past been free from performance royalties, and satellite radio pays a meager 6 or 7 percent of total revenue. Internet radio's charges are measured per song, per listener, and was raised last year from 8/100 of a cent per song per listener in 2006 to 19/100 of a cent per song per listener in 2010. That might not sound like much, but multiplied by the millions of songs and listeners, it amounts to $17 million in performance royalties alone.

Admittedly, this turn of events isn't surprising given RIAA's rich history of unpopular decisions and what some believe to be the crippling of the music industry as a whole.

Pandora Radio, we'll be sorry to see you go.

[via Washington Post]