Pandora; Internet Radio Companies Must Pay More Royalties

The operator of Pandora, a popular US webcaster and music service, thinks the ongoing dispute about performance royalties puts the entire industry branch in danger. "We're approaching a pull-the-plug kind of decision," said Pandora's founder Tim Westergren in an interview with the Washington Post adding "This is like a last stand for webcasting." Streaming radio services say they feel they are pushed into being defensive, by the music industry and by royalty representatives, whose royalty demands put too much strain on their type of business.

The dispute with internet radio stations about the compensation for performance rights has been smouldering for some time. Despite ongoing negotiations and various proposals, no common ground has been found between the webcasters and SoundExchange, an organisation representing artists and record labels. The disagreement is not about the royalties paid by all the radio stations – that is the same whether they broadcast via aerial, satellite or the internet. What is creating conflict is the different royalty levels charged for the performance rights, that is the rights to a certain recording owned by musicians, singers and labels.

While terrestrial (normal) radio stations don't pay any performance royalties, satellite radio stations pay six to seven percent of their revenue. However, a US government panel decided last year that webcasters are to pay a higher rate per song and listener, increasing the original fee of 0.08 US cents to 0.19 US cents by 2010. Smaller web radio providers complain that their royalty payments could exceed their earnings using this formula.

So this may spell trouble for the Internet Radio industry, we'll just have to wait and see.

Heise Online: More disputes over US internet radio royalties