We asked Pandora's co-founder, Tim Westergren, if he would like to discuss the decision of the Library of Congress's Copyright Royalty Board to uphold its decision to charge new crippling rates to Web-based broadcasters like Pandora. Tim responded: "I think there are two main points that would be great to make, both regarding dangerous perceptions floating around right now."
Two misperceptions about Internet radio, according to Pandora co-founder Tim Westergren:
...higher rates mean more money for artists. The reality is that the few Internet radio companies that opt to continue (and it will be VERY FEW) will be forced to license directly from labels. In this scenario, the artist share of the revenue will shrink to almost nothing as the monies will go directly to the label and be subject to the usual artist royalty rate (post-recoupment) of single digit percentages. So not only will this eliminate the vast majority of online stations that are the ONLY source of indie music exposure, it will take what little revenue is left from the artists.
...contrary to any statements by SoundExchange or RIAA representatives, Internet radio is not a highly profitable business nor will it be. For most (including Pandora), it's still a money-loser at the old rates that we are working as hard as we can (15 full time sales people are on the job) to turn profitable in a year or two. The growth figures put out by JP Morgan (recently revised downward from $500M to $150M) don't mean profitability—they mean more revenue which comes with greater costs. It's a thin margin business at best. No one's profiteering here.
For more about this situation, you can visit SaveNetRadio.org.
Copyright Royalty Board [Gizmodo]