Buckling under the weight of the Internet radio royalty hike that SoundExchange pushed through last July, Pandora may pull its own plug soon. Despite being one of the most popular Internet radio services, the company still isn’t making money, and its founder, Tim Westergren, says it can’t last beyond its first payment of the higher royalties.
SoundExchange offered a potential reprieve from the royalty hikes, but that turned out to be a red herring to sneak DRM onto web radio. In the end, SoundExchange was able to initiate a massive (and retroactive) royalty hike on Internet radio stations, imposing per-user fees for each song. Adding insult to injury, the royalties on Internet radio will double for big stations by 2010, to an estimated 2.91 cents per hour per listener—far higher than the 1.6 cents that satellite stations would pay. Radio stations don’t pay fees like these yet, but don’t worry. SoundExchange is working on fixing that problem. (link)