Thursday, August 21, 2008

Must Pandora Die?

From Kurt Hanson of AccuRadio:
The Internet radio royalty crisis may be coming to a head, as one of the country's most-beloved webcasters, Pandora, tells the Washington Post that it is on the verge of shutting down over the issue.

As you know, the problem in a nutshell is that whereas all other forms of radio in the U.S. and around the world pay about 3%-5% of their revenues as a royalty to songwriters and 0%-7% of their revenues as a royalty to labels and performers, last year the U.S.'s Copyright Royalty Board (CRB) set that second royalty rate for Internet radio to the equivalent of 70% to 300% of revenues.

While there's a judicial appeal of this decision in progress, plus occasional negotiations going on between SoundExchange (representing labels and musicians) and various subsets of webcasters, plus bills introduced in Congress that would roll back the CRB decision, none of these fixes may happen before Pandora's venture capitalists decide to give up and pull the plug on the service.

What are they thinking?!

I've been talking to several journalists this week about the issue, and the question they always ask me is this: "Trying to bankrupt your industry doesn't make any sense! WHY is SoundExchange doing this?"
Read Kurt's explanation here.

More from Kurt's blog post at Radio And Internet Newsletter:
If Pandora is forced to shut down, the outrage will be huge - among consumers, journalists, bloggers, working musicians, and even Congressional staffs.

That will be the tipping point that either (1) triggers a consumer backlash against the RIAA, which, if expressed in the form of a boycott, as some bloggers have proposed, could cost the industry hundreds of millions of dollars in record sales, (2) leads to belated reasonable negotiations from SoundExchange, and/or (3) spurs Congress to pass the Internet Radio Equality Act.

But Pandora doesn't deserve to be the sacrificial lamb that keeps other webcasters alive. They're loved by millions of listeners, and they've been great for musicians, fair to labels, and generous to their fellow webcasters.

Either SoundExchange or Congress should act quickly enough to stave that outcome off.

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