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Pandora Abandons Internet Radio Fairness Act, Turns To Copyright Royalty Board

REDMOND, WA (Hypebot) – Yesterday Billboard reported that Pandora is abandoning its efforts to reduce rates via the Internet Radio Fairness Act confirming earlier reports at Forbes. Pandora is now expected to focus efforts on the Copyright Royalty Board to lobby for changes beginning in 2016. So far Pandora's efforts seem most clearly to have resulted in widespread ill will from musicians and labels and pressure on terrestrial radio to pay performance royalties. Though Pandora does face a powerful new rival in iTunes Radio, which is free from the burden of having to succeed as a stand-alone enterprise, it still dominates internet radio and is considered a major Spotify rival despite being available in only 3 countries.

Pandora's ongoing attempts to reduce royalty rates take a major shift as they abandon efforts to bring internet radio royalties in line with terrestrial radio. According to Billboard's Glenn Peoples, a company "representative" said that:

"Pandora will focus on other paths to resolution."

Interestingly enough, Forbes' Connie Gugleilmo reported earlier this month that Pandora was focusing elsewhere attributing the exact same quote to Tim Westergren:

"Pandora will focus on other paths to resolution."

Billboard writer Glenn Peoples cites one "source" that says Pandora will turn to lobbying the Copyright Royalty Board, a "three-judge panel that sets statutory rates for webcasters like Pandora" which is the obvious next step.

Peoples also suggests the possibility of direct licensing deals with label, quoting Pandora's Tim Westergren in September:

"Direct deals are not something that we’re allergic to."

Note that the following month, Pandora CFO Mike Herring stated:

"People who have direct deals that are operating internationally are not doing well. Go pull Spotify's financials from last year. It's not pretty."

In September Pandora won a court decision in which major music publishers attempted to undermine an ASCAP agreement in progress. This is the agreement that will run out in 2015.

Copyright Royalty Board discussions begin in January for 2016 to 2020.

Last week Pandora released 2014 3rd quarter financials revealing a variety of growth:

  • Pandora closes record revenue quarter, with non-GAAP revenue of $181.6 million, growing 50% year-over-year
  • Mobile advertising revenue exceeds $100 million, growing 58% year-over-year to $104.9 million
  • 3Q14 GAAP total revenue of $180.4 million, growing 50% year-over-year
  • 3Q14 total listener hours of 4.18 billion, growing 17% year-over-year
  • Share of total U.S. radio listening for Pandora in October 2013 was 8.06%, an increase from 6.61% at the same time last year.
  • 70.9 million active users , growing 20% year-over-year
  • Of course, they're still not profitable but neither is Spotify.

    iTunes Radio is potentially the more serious threat given that it doesn't ever have to be profitable.

    Pandora's mobile strength will be an increasingly important aspect of their business with growing mobile ad sales and a still dominant iOS app.

    However, given the clear antagonism between major labels and Pandora, they may eventually face having to negotiate directly with companies that might be happier if they die.