“A LAST STAND FOR WEBCASTING” APPROACHES, SAYS PANDORA’S WESTERGREN: Pandora will soon face “a pull-the-plug kind of decision,” because of the high CRB royalty rates, founder Tim Westergren (pictured right) told The Washington Post. “We’re losing money as it is…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.” Though Pandora has indicated in the past that it will have to shut down if the current royalty rates are not reformed — which reportedly costs 70% of the company’s revenue — this is the strongest rhetoric the Internet radio service has yet used.

The Washington Post also reports that U.S. Representative Howard Berman (D-CA) is currently helping negotiate “a last-minute deal between webcasters and SoundExchange,” but he is frustrated by the process: “Most of the rate issues have not been resolved…If it doesn’t get much more dramatic quickly, I will extricate myself from the process.” Berman (pictured left) is chairman of the Congressional Subcommittee on Courts, the Internet, and Intellectual Property, which held a hearing in June to discuss a performance royalty for broadcast radio (RAIN coverage here). Berman, representing California where (along with New York) U.S. major labels are based, sponsors the House bill that would implement such a royalty for terrestrial radio.

Webcasters and the record industry are particularly at odds over the monetization of Internet radio. SoundExchange complains that webcasters “have done too little to make money from playing their songs.” Though Pandora does not currently run audio ads, Westergren reported that they will soon broadcast “subtle” audio sponsorship ads, similar to those found on NPR (“The next half hour is brought to you by…”). Currently, 25% of the service’s work-force is dedicated to ad sales.

Read the full Washington Post article here.

RAIN ANALYSIS: From an essay by business writer James Surowiecki in the The New Yorker a couple of weeks ago (here): “When something you own is necessary to the success of a venture, even if its contribution is small, you’ll tend to ask for an amount close to the full value of the venture.” It seems so clear that roughly 5% of revenues would be a reasonable sound recordings performance royalty for radio — that’s what the rate is for composers in the U.S., that’s what the rate is for the sound recordings performance royalty for radio in other nations, that’s about what the rate is for cable radio and satellite radio (It’s almost certainly what the legislators who passed the DMCA back in 1998 would have expected). But as Surowiecki explains, if SX has a shot at 75% or even 300% of revenues, they’re motivated to go for it! Even if it’s, in the long run, against their own interests. — KH

OXENFORD: SOUNDEXCHANGE’S REVENUE ARGUMENT FLAWED, SMALL COMMERCIAL WEBCASTERS STILL LEFT OUT OF DISCUSSION: Offering analysis on The Washington Post article is industry attorney David Oxenford. Finding fault with SoundExchange’s claim that webcasters could be earning higher revenues, he writes, “If there was some way of making more money from Internet radio operations, doesn’t the recording industry think that the webcasters would take advantage of those practices? Why would they leave money on the table if they could figure out a way to make it? If they could make money, they would – though the recording industry seems not to believe it.” Absent, both in Berman’s negotiations and the article, are small commercial webcasters, terrestrial broadcasters who stream their programming online, and noncommercial webcasters. Pointing to RAIN publisher and AccuRadio founder Kurt Hanson’s statement to the Senate Judiciary Committee (here), Oxenford argues that this absence means “a resolution by the large webcasters, unless it is all encompassing and on terms that all parties can live with (which seems unlikely given the diverse interests involved), will not resolve the dispute over the CRB decision. So the battle continues.” Read more of Oxenford’s analysis at his Broadcast Law Blog here.

PANDORA’S “PULL-THE-PLUG” WARNING SPARKS MORE FOLLOW-UP: Pandora’s announcement that it may shut down soon triggered an enormous amount of press reaction over the weekend. In particular, TechCrunch’s Michael Arrington muses (here) that Pandora may have to become Internet radio’s “sacrificial lamb,” thereby forcing artists and labels to “realize just how absurd their position is.” Perhaps losing a promotional and revenue asset such as Pandora will show the music industry just how valuable Internet radio is, reasons Arrington. Mashable also responds to the news (here), suggesting that Pandora add social networking features similar to Last.fm to survive.

SALEM TO STREAM BROADCASTS WITH STREAMAUDIO: Salem Communications will now broadcast its music and talk radio stations online using StreamAudio (formally ChainCast Networks). For more, read the press release here.

U.S. INTERNET SPEED SLUGGISH COMPARED TO JAPAN, FINLAND: A new study by the Communication Workers of America finds that the U.S. has a median download speed of 2.35 megabits per second, a figure that when compared to Japan’s 63.6 mbps and Finland’s 21.7 mbps, places the U.S. at an overall Internet speed ranking of 15th. “We’re behind the rest of the world and it really matters. The jobs of the future depend on having the best networks possible,” said Debbie Goldman, coordinator for the Communication Workers of America. For more, read the Los Angeles Times’ coverage here

Comment

Other stories
RAIN 7/2: UK's Telegraph says DAB's been a problem; Internet radio "the solution"
RAIN 7/1: Obama approves Webcaster Settlement Act of 2009
News Flash: President signs Webcaster Settlement Act of 2009
RAIN 6/30: New York Times picks 7 stand-out mobile radio apps, including FlyCast and Sirius XM
RAIN 6/29: Autonet selling in-car Wi-Fi directly to consumers
RAIN 6/26: Nielsen study shows radio down, but not out, among teens
RAIN 6/25: Google selling ads in mobile apps; FlyCast creates unique WEEI app
NPD: "Tweeters" almost twice as likely to listen to Net radio as others online
RAIN 6/23: Stern blames rights issues for iPhone snag
RAIN 6/22: Dahl to return to radio will daily podcast