Wednesday, July 08, 2009

As most things go...

People always find ways to ruin a good thing:

A group representing artists and record labels reached a royalty-fee agreement with music Web sites, ending a two-year battle and removing a cloud from over online radio.

"It's a substantial reduction in per-song streaming fees," says Tim Westergren, founder of Pandora Inc., an online music service that will stream about one billion hours of music this year. The royalties question threatened Pandora's viability and hung over all aspects of the business, he said, making it hard to negotiate with potential partners. Now, "we're out from under that," he said.

But as a result of the new royalty rates, Pandora plans to start charging its heaviest users a fee. Those listeners on the free version of Pandora who tune in for more than 40 hours a month will have to pay 99 cents to keep listening for the rest of the month.

To be clear, I'm not one of those who insists that all the best things in life should be free; it's only right that artists are compensated for the use of their work. Yes, Pandora owes royalties.

And it's not the .99 cents...who can't afford a dollar-a-month for anything? But why should the end-user pay?

It's called advertising (something they're already doing btw). By one estimate Pandora has 30 million registered users. Surely it's possible to create an advertising rate-structure that generates enough revenue to meet expenses and turn a profit beginning next year as they are currently targeting.

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