As discussed in many music industry news sources, Pandora is on an aggressive crusade to lower costs and payments to copyright holders, as they continue to suffer from huge net losses ($5.4 million net loss for the previous quarter).
The company has raised significant opposition from many artists and other rights holders in their petition to Congress to pass the Internet Radio Fairness Act (IRFA) that would lower fees for the performance of sound recordings to that of cable and satellite radio. In a congressional hearing on Capitol Hill late November, supporters of the bill (largely technology venture capitalists) stated that reducing royalty rates for web radio would help artists over the long term by allowing the services to continue to grow. Law makers did not seemed convinced, an the bill currently seems have lost movement while congressional hearings continue. If Pandora continues to pay the current 60% of its revenue in royalties, many critics believe it will be impossible for the company to get their numbers in the black.
Pandora has also began proceedings to sue performing rights organization ASCAP in hopes to lower performance royalties paid to ASCAP’S songwriters and composers for their works. In the lawsuit filed in early November, the non-interactive online radio service asked the court to set “reasonable fees and terms” through 2015, claiming that the original 2005 license they obtained from the PRO was “ill-suited and not reasonable.” The company points out that ASCAP changed it’s rules in April 2011, allowing members to withdraw certain licensing authority. Some members such as EMI have already taken advantage of this, and will negotiate a new media rights deal directly with Pandora.
The future of Pandora seems to be greatly affected by the outcomes of these pleas of intervention from the judicial system. Lowering payments to artists and other rights holders may allow Pandora and similar companies to stay afloat but it is not a solution for the long term.