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News
Pandora Radio on Brink of Collapse
Sunday, August 17th, 2008 at 4:00 PM - by John Martellaro
Pandora radio has been very popular on the Web and the Pandora player is very popular on the App Store for iPhone and iPod touch. However, royalty fees, approved by the federal government, may put Pandora out of business soon, according to the Washington Post on Monday.
"We’re approaching a pull-the-plug kind of decision," said Tim Westergren, the founder of Pandora. "This is like a last stand for webcasting."
Rep. Howard Berman (D - Calif.) is trying to broker a last minute deal with SoundExchange, the representative of the RIAA that collects royalty payments. However, Rep. Berman is frustrated, and the two sides are very far apart.
Pandora’s royalty fees amount to 70 percent of its US$25M annual revenue.
"We’re losing money as it is," said Mr. Westergren. "The moment we think this problem in Washington is not going to get solved, we have to pull the plug because all we’re doing is wasting money."
Steve Jobs at one time said that it’s very hard to make money selling music. Apple uses near break-even music sales to support its hardware sales, the iPod. Even so, there has been a seemingly endless succession of companies that insist they can make good money selling only music on the Internet, only to have their business model collapse. Pandora may be about to become yet another one - no thanks to onerous royalty fees that have been imposed.
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