Internet radio, music industry settle on royalties

The LA Times reports that record labels and internet radio stations have struck a deal that should ease the cost of paying royalties on songs played. Proponents of online radio, such as Pandora co-founder Tim Westergren, feared that the fee structure set in 2007 would cause the fledgling industry to fail.

Under the old agreement, online radio stations were to pay a per-song, per-play royalty beginning at around .08 cent and rising to .19 cent by 2010. Under the new agreement, online radio sites pay a slightly lower per-song royalty (.08 cent to .14 cent) or 25 percent of their revenue, whichever is greater. For a company like Pandora, which has 30 million registered users, this could be enough of a push to enable them to make a profit and continue to operate.

Somewhat related, and interesting to me, I heard Wired magazine editor Chris Anderson interviewed on Fresh Air (regular radio, not online). He was talking about a business model known as "freemium," wherein the vast majority of users of a service get content for free, but a very small number of people pay to get access to some premium content. His example was the Wall Street Journal, which allows free access to much of its content but charges for access to some content, presumably the type of information that would be important enough to business people to pay for but that the average news-reader wouldn't consider essential.

Anyhow, it looks like Pandora is giving this model a try. You can currently pay $36 for a year of a slight upgrade from the free service -- no ads, a desktop application to play the songs, and a couple other perks. There's no fundamental improvement over the free service (it won't play different songs, won't allow you to choose the song it plays or download songs), but I suppose that if you listened to Pandora for many hours every week, it may make a difference in your experience. It looks like they're going to also begin charging to listen to Pandora radio for more than 40 hours per month, which, by requiring payment (instead of just offering the premium service), is sort of pushing the "freemium" envelope, as it were.