Wednesday, April 18, 2007

Pandora Under Fire

Today Tim Westergren, founder of the Pandora net radio service, sent out an email to urge listeners to sign a petition against new legislation from the Copyright Royalty Board. Apparently the royalty rates are going to triple for internet radio, which could cause serious reprecussions, and according to Westergren, drive most, if not all, web radio services out of business.

As Westergren points out in an interview with Gizmodo, the two main reasons supporting this decision are illusions. First of all, artists will NOT get more money; rather, the record companies will the royalties, and the artists only their usual percentage. Basically, this means that it will filter through the record companies, and very little will get to the artists themselves.

The second reason, that they can charge more royalties because the radio companies have a large profit, couldn't further from the truth. As Westergren says, "For most (including Pandora), it's still a money-loser at the old rates that we are working as hard as we can (15 full time sales people are on the job) to turn profitable in a year or two." Even with rates that are a third of the new value, the companies are losing money. Also, based on the new rates, royalty expenses would exceed revenue. It's also retroactive to 2006.

These rates are typical of an ignorance to the value of the industry. Internet radio is a fantastic way to get new artists' names out into the world. Pandora takes your taste in music and recommends other artists and songs. This means that, for people like me, I will hear a song or artist I like, and if I really do like 'em, I'll buy the song off iTunes, or head out to get the CD, or go to a concert the next time they're in town. This means more money for the artists (AND the record companies).

This isn't the first time internet radio has been screwed. In 2002, the CRB gave an initial royalty fee, was a 0.07¢ cost per song per listen. Since there could be hundreds of listeners for even the smallest webcaster, this was a huge cost. This money went straight to the record companies. This was also in addition to royalties stations were already paying. And the kicker: it was retroactive 4 years.

The question is, what makes people so paranoid about copyright, and especially so when the internet is involved? Steps against piracy end up hurting those already hurt by it, and it never seems to achieve its goal. Not to mention that traditional radio barely yields enough money to make producing singles worthwhile for all but the most successful artists. There is hardly much of a difference between that and internet radio, except that internet radio is more convenient, tailors to your taste better, and doesn't have annoying audio ads. Oh, and that it isn't charged per listener.

Non-linked sources:


Devil From Russia said...

You speak the truth guy. Pandora is wonderful! I hope it doesn't get fucked up.

Jesse said...

0.07¢... 100 users = 7 cents...
1428.57 users = $1

At first glance, that doesn't seem too bad (but it does seem awfully arbitrary). I also think people would be a lot less pissed if the money actually went to the artists... and I'm not just playing devil's advocate here.

I think I would personally be completely comfortable with 5000 users = $1, or 0.02¢ a song.

Devil From Russia said...

Did you hear Oli? No more Pandora in Canada starting as of May 16th :(. We must blog our sadness, emo-style.

OnHech said...

They say Pandora will be back up in Canada eventually. That was a major source for me to find new music, I was mad when I found out. Keep up the posts oli!