The Biggest Threat to Web Radio

I am a die-hard Pandora enthusiast. I love being exposed to new music that I don’t hear on mainstream radio, and I enjoy being able to fine-tune my channels to play music that would interest me the most. However, my listening days may be coming to an end, due to a ruling that could put Pandora out of business.

Web radio is fighting back against possible fee increases of the Copyright Royalty Board (CRB) that may cripple the industry. The ruling, announced earlier this month, imposes a yearly royalty rate increase set "per performance" from 2006 to 2010. This could be severely detrimental to small web broadcasters, who claim that it could exceed their total revenues. In a WSJ article, the co-founder of Pandora states that if the ruling stands, his company may cease to exist.

Pandora has had some success this year in growing its site visitation by an average of 10% each month. With over 150% growth in unique visitors last year, Pandora’s popularity may come with a steep price. The CRB ruling also indicates that there is a $500 minimum fee "per channel" per year. The ambiguous definition of a "channel" puts websites which offer limitless customized "channels", like Pandora, in a precarious position.

Live365.com, which allows users to create their own radio stations, is in a similar position. It could face the per channel fee or be subject to royalty rates which will jump from $ .62 per person per month in 2006 to $ .86 in 2007. Unique visitors to the site increase by a mere 0.34% per month on average; however, the royalty fees alone grow at an average rate of 2% a month. If Live365.com has to pay royalty rate fees retroactively as the board has demanded, it could possibly cost them over $3.7 Million in 2006.

*Based on listening statistics reported by BridgeRatings, this analysis was calculated using an estimated 45.5 Listening Hours/Month, and an average song length of 3.5 minutes.

This has the potential to be the nail in the internet radio coffin. By forcing radio stations to pay these increased fees, the level of access and choice to consumers will flatten within six months. Sites like Pandora and Live365 have been urging listeners to sign a petition to overturn the ruling. A rehearing is imminent, so hopefully listeners (myself included) will be able to enjoy the new music we’re exposed to through web radio in the future.

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