Giant of Internet Radio Nears Its 'Last Stand'

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    Giant of Internet Radio Nears Its 'Last Stand'

    Pandora, Other Webcasters Struggle Under High Song Fees

    [SIZE=-1]By Peter Whoriskey[/SIZE][SIZE=-1]
    Washington Post Staff Writer
    Saturday, August 16, 2008; D01

    [/SIZE]OAKLAND, Calif. -- Pandora is one of the nation's most popular Web radio services, with about 1 million listeners daily. Its Music Genome Project allows customers to create stations tailored to their own tastes. It is one of the 10 most popular applications for Apple's iPhone and attracts 40,000 new customers a day.

    Yet the burgeoning company may be on the verge of collapse, according to its founder, and so may be others like it.

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

    The transformation of words, songs and movies to digital media has provoked a number of high-stakes fights between the owners of copyrighted works and the companies that can now easily distribute those works via the Internet. The doomsday rhetoric these days around the fledgling medium of Web radio springs from just such tensions.

    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.


    Westergren and other webcasters argue that Web radio, which generally plays a far wider range of music than is offered by traditional radio, provides invaluable promotion for many independent musicians.

    Matt Nathanson, a singer-songwriter who has recorded for both major and independent record labels, said he is worried that the demands placed on Internet radio could "choke" the industry before it gets its footing.

    "Net radio is good for musicians like me, and I think most musicians are like me," he said. "The promotion it provides is far more important than the revenue."

    Westergren, seemingly wearied by the constant haggling over the issue, signaled that Pandora's investors may also be impatient for an end.

    "We're funded by venture capital," he said. "They're not going to chase a company whose business model has been broken. So if it doesn't feel like its headed towards a solution, we're done."

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