Closing the lid on Pandora?

Ever since Napster, it's been anybody's guess as to how (or if) music distributors can deliver media to listeners in a way that is satisfactory to both consumers and people with a financial stake in industry. The industry has made it clear that they will enforce their copyrights, and, with the support of the Federal government (particularly via the Digital Millennium Copyright Act), has tended to favor pretty strict control over the use of their protected materials.

One solution that has, at least up until now, seemed to be working was using the radio format to play music over the internet. For many years, record companies and artists have relied on performance rights organizations to streamline the licensing process so that copyright owners can profit from radio broadcasts of their songs. These groups (in the U.S., it's ASCAP, BMI, and SESAC) are responsible for setting royalty costs for radio play, keeping track of who played which songs on which station, and getting payments from radio stations to copyright holders.

Sound Exchange is the organization responsible for managing digital broadcasts, including Internet radio broadcasts. The Washington Post ran an interview last week with Tim Westergren, founder of a very popular Internet radio site called Pandora, in which he discusses the effect that recent royalty hikes have had on the otherwise successful startup.

Pandora takes a unique approach to radio broadcasting in which listeners can create personal radio stations that play songs that match their taste. Listeners can enter a song or artist that they like, then the radio station will try to play songs that have similar characteristics. The data about the songs comes from a related project called the Music Genome, in which analysts assign characteristics to describe songs. The idea is that each user can start with something that they know they like, then play music that is musically similar, but which they may not have otherwise found. Pandora makes its revenue from advertising on the website.

If you'd like a musical background while you ponder the ramifications of digital media on the world of intellectual property, you may want to try Pandora sooner rather than later, for Westergren claims that the new, higher royalties are taking their toll on his company's profits and it may soon have to pull the plug.

It's been fun, at least for IP nerds like myself, to watch intellectual property policy evolve to meet the demands of new technology. If Pandora's royalties bills are too high and it has to go away, I wonder who might step up next to deliver free music over the Internet.

If digital copyright issues are of interest to you, there is no better place to start reading than the Stanford Copyright and Fair Use Center, where you will find a real feast of thoughtful commentary, links to all sorts of copyright sources, and an excellent copyright primer contributed by NOLO Press.