Music-download service 7digital faces plenty of skepticism since its U.S. launch two weeks ago.

According to Ben Drury, its co-founder and chief executive, many of the questions–how do you compete with iTunes, how do you stand out amid a sea of music services–are valid ones.

“We didn’t want to just launch a ‘me-too’ store,” he said in an interview in New York, where he’s attending the CMJ Music Marathon and meeting with media companies old and new, including CBS (CBS), eBay (EBAY), Pandora and AOL, to discuss potential partnerships.

Read the rest of this post on the original site

The next generation of radio listeners might not remember the olden days of scrolling through stations by turning a knob on a car or home stereo. Instead, the radio they listen to could very well be on their mobile phones.

Read the rest of this post on the original site

Pandora has finally emerged from a two-year battle with the Copyright Royalty Board over royalty payments for the artists of songs streamed online. And for the first time in its history, the popular streaming-music service will charge its heaviest listeners a fee for using it.

Webcasters reached an agreement last week with Sound Exchange, the nonprofit organization designated by the U.S. Copyright Office to negotiate on behalf of performing artists, which says that large webcasters like Pandora earning more than $125 million a year will pay a quarter of gross revenues in royalties, or about 0.09 cents per song, whichever is higher.

Read the rest of this post of the original site

Pandora, a private company that has created the most popular Internet-based radio service in the U.S., has a lot of zealous fans. In fact, they are a bit like the fanatics who love Apple Inc. and its well-designed products. For its legions of fans, Pandora stands out not just as an Internet radio station but as a gateway to discovering new music. The company’s core technology is based on the Music Genome Project, which essentially matches users’ favorite musicians or songs with other music of similar genres, based on a compilation of hundreds of musical attributes.

Read the rest of this post

In August, Pandora founder Tim Westergren told the Washington Post that the future could be bleak for the Internet radio station due to high percentage of its revenue being forced to go to royalty fees. Now, one month later, Westergren is shooting down rumors and socialsphere speculation about why Pandora is facing potential extinction.

“One of the fallacies that is floating around is that Internet radio is poorly monetized–that is not true,” Westergren said. “We’re just being charged more than other forms of radio.”

Read the rest of this post

Pandora is one of the nation’s most popular Web radio services, with about one million listeners daily. Its Music Genome Project allows customers to create stations tailored to their own tastes. It is one of the ten 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.”

Read the rest of this post

The bell is tolling for Webcasting in the U.S. after the Copyright Review Board refused to alter the new proposed royalty rates, which represent an enormous hike in the money online radio stations must pay. The new rates take effect July 16, and a coalition of Webcasters led by the popular Pandora are pleading that their business will go away with these new payment obligations.

Many times, these outcries are public-relations strategies that exaggerate the impact to garner sympathy and, subsequently, lower rates. In this case, it’s not hyperbole. Net radio companies will go bankrupt if they continue to broadcast under these new rates, so expect many to go silent. But royalty rates don’t impact people’s desire to listen to music. John Gilmore is credited with saying “The Internet interprets censorship as damage and routes around it.” Oversized royalties create a type of censorship, and the resilient Internet and capitalism will route around this as well. Webcasting will be revitalized stronger than before, because this time it will have a viable long-term royalty structure.

On first glance the new Webcasting rates sound reasonable: 0.0011 per song play per listener and $500 per station. However, two factors make the total larger than you’d expect. First, many Webcasters offer individual stations tailored specifically to every individual’s taste. This personalized experience triggers a massive amount of “station” royalties. (I have four personalized Pandora stations.) Secondly, although the 0.0011 sounds small, it adds up quickly when someone clicks play and leaves a station playing for hours in the background. I did some math using the last publicly published numbers for three top Webcasters and arrived at some startling results. (These numbers are surely not precise, but give you a baseline.)

And if those numbers aren’t bad enough, there are built-in rate increases for the next four years.

Compounded, these numbers represent a growth of more than 100% from 2007 rates. It’s impossible to run a profitable online Webcasting business with the new royalty structure. Pandora (which I often use and really like) and all other legitimate U.S. Webcasters will go bankrupt or simply turn off the lights.

Some Webcasters have started a grass-roots lobbying effort and convinced some congressmen to introduce a bill that would make satellite, AM/FM and Webcasting radio all pay the same, much lower rates. Unfortunately, it’s relatively easy to get a bill introduced and, by design, hard to get it through the proper committee, agreed to by both houses of Congress and then signed by the president. Media companies are expert lobbyists, and it just takes one powerful senator to block a bill. And it’s not a quick process, so short-term relief seems highly unlikely.

However, net users’ thirst for music isn’t altered one note by a royalty decision. People will still crave music and the passive listening experience while sitting in front of the computer, where they spend an increasing portion of their life. A new generation of Webcasters will emerge to fill the vacuum created by this royalty-induced musical implosion.

This new generation of Webcasters will limit their stations to music from labels who will agree to a direct license at lower rates. Many were surprised when the Copyright Review Board’s rates did not offer a “percentage of revenue” option–a concept both sides advocated, albeit with greatly different numbers. Webcasters will willingly pay record labels a single-digit percentage of revenue, similar to the 3% they pay to ASCAP/BMI, which represents music publishers. Smaller labels will agree to this or a more modest per-song royalty, recognizing that they are receiving (besides the money) valuable promotion. As more labels agree, the holdout labels will feel competitive pressure to ensure Internet promotion for their artists and be compelled to agree. For sure, this transitional period for Webcasting means many of your favorite songs will not be heard on online radio, because the major labels who sell 80% or so of music will not immediately voluntarily agree to lower rates. (The record labels were the driving force in lobbying Congress for new laws under which Webcasters are now required to pay these royalties.)

The temporary absence of the major-label song library may not be as crippling to Webcasting as you might think. The constraints of odd-numbered stations on the limited AM/FM spectrum have consolidated consumer taste. But the Internet has unlimited capacity, which allows for a much greater diversity of music. An astonishing 55% of the songs played on Pandora are from independent labels. And since users can vote thumbs up or thumbs down on every song, this is likely an accurate representation that consumers desire a greater variety in their audio experience.

You have until July 15 to try Pandora before it dies. It’s a wonderfully simple interface, where you pick a song you’re in the mood for and a custom radio station is auto-constructed and begins playing in just seconds. From there you can use your Web browser to tailor your station to respond to your tastes even better. While the Pandora of today will go away midsummer, we hope the management of Pandora can find a way to continue operations and this time find a way to build their business on more solid financial terms.