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Web Radio Companies Reach Deal With Labels: Pandora Survives

7/8/09, 9:10 am EST

Internet radio companies and the major record labels have reached a revised royalty agreement that will make it possible for beleaguered services like Pandora to survive, the New York Times reports. Under the terms of the deal, which the Internet radio companies struck with negotiating organization SoundExchange, minimum per-stream royalties were cut by roughly 40 to 50 percent. As Rock Daily previously reported, popular Web streaming service Pandora was in serious danger of shutting down before yesterday’s deal because 2007’s royalty structure made it impossible for Internet radio to remain profitable.

“For more than two years now I have been eagerly anticipating the day when I could finally write these words: the royalty crisis is over!,” Pandora founder Tim Westergren wrote in a blog post on the Pandora site. “Webcasters, artists, and record labels have reached a resolution to the calamitous Internet radio royalty ruling of 2007. Pandora is finally on safe ground with a long-term agreement for survivable royalty rates. This ensures that Pandora will continue streaming music for many years to come!”

Despite the revised rates, Internet radio royalties are still higher than that of terrestrial (where the artists receive no royalties — a fact Billy Corgan went to the Capitol to fight) or even satellite rates, Westergren said, but they’re low enough that the Internet radio will continue to survive in the digital landscape. Pandora said the new royalty rates would slightly change the service for only about 10 percent of their most-frequent listeners. For now, the free service will allow each user 40 hours of music per month. If a user goes past that cap, they’ll be given the option to go unlimited for that month for 99 cents. “We hope this is relatively painless and affordable — the same price as a single song download,” Westergren writes. As Rock Daily previously reported, Pandora experimented with ads to help offset the higher royalty rates.

Under the terms of the new deal, the more popular Internet radio services have two options: Either pay royalties at a per-stream fee that has an annual incremental rate until 2015 or give up 25 percent of their revenues, the NYT reports. Smaller Internet radio services that gross less than $1.25 million per year have the option of paying 12 to 14 percent of their revenues. As it stands now, Internet radio stations will pay between six to 15 hundredth of a cent per streamed song, down substantially from the 19 hundredth of a cent required in the previous deal.

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Comments

Wip | 7/8/2009, 1:28 pm EST

What’s the difference between someone stealling cookies from a store or a company like Pandora or any other stealing music from a writer? None. the song is property and it belongs to the songwriter and they should get paid period. Most of the people that steal music would call the police if you stole something from them but yet they are willing to rip off songwriters for their property it just isn’t right.

Lan | 7/8/2009, 1:32 pm EST

Judith Hill, I am one of your fans. God bless you more in your singing career. You represent the Asian voice. Michael Jackson must be very proud of you. Wish Michael Jackson was alive so you can sing with him in his London Concert. You really did an amazing job by singing “Heal the World” during Michael Jackson’s Memorial. My Salute to you…

huzzah! | 7/8/2009, 2:33 pm EST

I rarely feel one way or another about a particular business but seeing as this form of music distribution is just beginning, I’m thrilled to hear that Pandora has come out of this mess.

Keep up the good work guys, pandora is a great service and I’m glad that it’s also a profitable one.

RE: Wip | 7/8/2009, 2:43 pm EST

Pandora steals no music whatsoever. They pay for the rights to play music which are legally owned by record labels who bought the songs from artists who created them in an entirely voluntary contractual arrangement. Pandora plays these songs in a pseudo-random manner(similar to radio).

There was legal concerns over the exact amount paid due to the way they allow specific content to be more frequently played. These concerns arose because the technology to create these patterns of playback had not been considered in net radio royalty agreements before, so they were being charged much higher costs as a result. After negotiating and explaining the mechanisms to the labels, pandora was given a new payment model that allowed both parties to profit and provide a service to customers.

Pandora has not stolen anything.

Julie | 7/8/2009, 3:09 pm EST

Love love love Pandora. So grateful that an agreement has been finalized and that Pandora will live on!

Jeffrey | 7/8/2009, 3:09 pm EST

Wip, the songs doesn’t always (or even often) belong to the songwriter; it belongs to whoever owns the copyright, which in many cases is the record company if it’s a band/musician signed to a label. Sometimes it’s the independent songwriter, but if they’ve submitted their music to Pandora and agreed to the terms and conditions, which is what you have to do to get your music played on their station, then you’ve entered a legal agreement with them according to the terms of the contract. No one is stealing from anyone. If the owner of the music, whether it be a label or the songwriter, has not entered into the contract and submitted their music, then they are not played by the station.

TERRI TAYLOR | 7/8/2009, 4:08 pm EST

Yes, I use my name. No, I’m not MJs biggest fan. I normally don’t comment on these things but I have to ask, why is there such a BIG DEAL about this man’s funeral. He was loved, and to show their love he was given one of the greatest goodbye and life celebrations in years. That’s a GREAT THING folks!! All of you who stand here acting in judgment must be PERFECT or IGNORANT. I’m just not sure which. When MJ passes, all of these stupid questions about drug and child abuse but I pose the same “fatjoey” question to the fans of ELVIS PRESLEY. How good of a father could HE have been, strung out on drugs all the time?? Yet, his home and burial places are SHRINES!! The answer is, HOW IN THE HELL DO YOU KNOW?? Ask the kids. I think MJs daughter called him ‘daddy’ as did Lisa Marie called Elvis ‘daddy’ as do I call my dad ‘daddy’ as do most of you here with FATHERS who do NOT deserve the honor, you’re calling that man ‘daddy’ as well. Wake up, people, when you speak poorly of others, especially the dead, it tells me that there is some insecurity and jealousy on the part of the speaker. If you’re too dumb to understand that last sentence, don’t bother writing as you’re not an intellectual equal and would just anger me to have to constantly define every word spoken (or written in this case). Just wish well this family, as well as Farrah’s, McMahon’s, May’s, and all others who took such a loss. And offer sympathy as well. Regardless of who you are, or how much money you make, if you touched someone’s heart and then you are lost regardless of how, the loss is real is extremely painful and permanent. As for me, I wish all of these families the best. God bless all of you and them (including the haters who really don’t, in my human mind, deserve it.)

Glad it’s not my place to say one way or the other.

I hate Pandora | 7/8/2009, 6:33 pm EST

It sucks! Might as well listen to regular radio! Long live Grooveshark, NO RESTRICTIONS, WHOOOOOO!!!!!!!!!!

Miss Katie | 7/13/2009, 2:34 pm EST

I simply love Pandora.com. I definitely fall into the top 10 percent most frequent listeners (I probably fall in the top 2 percent, I love it that much.) I received an email from Tim Westergren last week informing me that the settlement was in place and what it would mean to me as a frequent listener. Without hesitation I sent Pandora $36 for an annual subscription. $36 dollars!!! That’s like 2 or 3 CD’s.

Pandora is awesome. A service as rockin’ as Pandora is worth paying for. (In my humble opinion.)

(Hell, I cancelled my stupid Sirius sattelite radio account this year, at like $150 a year plus $150 for the radio; Pandora is a way better deal for a way better service! Add it up.)

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