Horrible news for fans of Pandora Internet Radio. In fact, it's not looking good for any Internet radio sites — my beloved Slacker.com is in jeopardy too. Why? Looks like the government has a hand in bringing down what might be the best thing to happen to the music industry in years.
Music isn't free. We understand that. After government intervention, terrestrial radio managed to be free from royalty fees. The stations don't have to pay royalties to musicians for the music they play. Satellite radio does. Works out to be about 1.6 cents per hour per subscriber.
How much must Pandora and our other favorite radio sites pay?
Due to a remote federal panel ruling last year, Internet radio must pay an exorbitant 2.91 cents per hour per listener.
For Pandora, that's about 70% of their expected $25 million revenue.
Unfortunately, that percentage will stick no matter how successful Pandora is. With that percentage hanging over their heads, how can a company move forward? In a bold response, Pandora is saying they would rather pull the plug
on their entire business and shut down the site than to pay that fee.
This is sad news for the music industry in general. Pandora has a rather unique way of exposing users to new music. You set up your personal radio station, and pick artists you like. Pandora then adds other artists it thinks you will like. What a great way to learn about new musicians, and what an incredible way for new artists to gain exposure.
Other websites do similar things. Slacker will suggest similar artists as you create your own radio station.
None of these sites have serious advertising revenue, so royalty fees imposed by SoundExchange, who represents artists, might send them all down the tubes.
If you ask me, the music industry isn't just shooting itself in the foot. They're blowing up the entire leg with this move. —Leslie Shapiro
UPDATE! We heard from Slacker's PR Rep: "I wanted to let you know that we are honored you are enjoying Slacker and also let you know that "we aren't going anywhere" and this is not something Slacker is actively concerned about. Slacker's business model from the beginning was actually built taking increased rates
Good to know!
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