Pandora Internet Radio to shutter their service soon?

A pretty interesting tech article in the Post today about the 900lb gorilla in the room for Internet radio. Despite some of the best traffic numbers in their company’s short history (thank you to the iPhone) the start-up company Pandora may soon have to shutter their service.

“We’re approaching a pull-the-plug kind of decision,” said Tim Westergren, who founded Pandora. “This is like a last stand for webcasting.”

At issue is the onerous rate that Internet radio stations have to pay for their services.

Last year, an obscure federal panel ordered a doubling of the per-song performance royalty that Web radio stations pay to performers and record companies.

Traditional radio, by contrast, pays no such fee. Satellite radio pays a fee but at a less onerous rate, at least by some measures.

As for Pandora, its royalty fees this year will amount to 70 percent of its projected revenue of $25 million, Westergren said, a level that could doom it and other Web radio outfits.

I’ve always said the short term greed of the existing content players could kill the medium of Internet radio before it really got its start. No where in the computations are the added per listener cost of Internet radio–it costs more to have more people listen, unlike traditional radio which has a one off broadcasting hardware cost no matter if 1 or 1000 people listen to their station.

Sen. Jesse Helms brokered the last Internet radio survival package but he has passed away. Some on Capitol Hill are trying to find a solution, but the recording industry’s deep pockets full of cash going into the re-election campaigns of many members is hard to ignore. This is one issue in which money talks far more than Republican or Democrat (one of the worst on this issue is the Democrat John Conyers but one of the ones trying to save Internet radio is the Democrat Howard Berman)

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