Royalty Crisis Averted for Pandora & Other Internet Radio Stations

An agreement has been reached between SoundExchange and a group of Internet radio stations that includes the popular Pandora service. The various parties involved announced the agreement late on Tuesday, an agreement that reduces royalty rates set by a 2007 ruling from the US Copyright Royalty Board, rates that were generally higher than the total revenue of the affected stations.

"For more than two years now I have been eagerly anticipating the day when I could finally write these words: the royalty crisis is over!," wrote Tim Westergren, founder and current Chief Strategy Officer of Pandora, wrote in a blog post on his company's site.

He added, "Webcasters, artists, and record labels have reached a resolution to the calamitous Internet radio royalty ruling of 2007. Pandora is finally on safe ground with a long-term agreement for survivable royalty rates. This ensures that Pandora will continue streaming music for many years to come!"

The new rates, which are still higher than those paid by traditional radio stations, were agreed to by SoundExchange, which represents labels (and theoretically artists) and three of the largest Internet radio stations, including Pandora.

Under the agreement, stations generating more than US$1.25 million must pay SoundExchange 25% of their gross revenue, or .093 of a cent per song, per stream, whichever is greater. That amount increases to .14 of a cent per song per stream by 2015.

Smaller stations must pay 7% of their expenses or 12% of the first $250,000 in gross revenue starting in 2009. Subscription based services must pay .15 of a cent per stream per song, a rate that increases to .25 of a cent in 2015.

As part of the agreement, Pandora instituted a new cap on how many hours per month users can use its service for free. The free version of Pandora is now good for up to 40 hours per month, and the 10% of listeners that use the service more than that will have to pay $.99 to extend the service in any month they go over the 40 hour limit.

Pandora also has for-fee versions of its service, including Pandora One, which includes other benefits and added services.