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June 16, 2011
Pandora and the Ongoing Search for Profits
Back in 2009 I noted that 50% of Pandora's revenues were going straight to the Cartel
. Despite the advance of time the situation hasn't gotten any better. Marketwatch reports the same costs to the company for 2010
, and the situation may get worse if rights-holding organizations seek to require Pandora to pay the planned increase in public performance-right fees for all Pandora subscribers. Currently they pay $0.00102 for non-subscribers and $0.0017 for subscribers. In 2015 those rates go up by 37% and 47% respectively
Pandora also has more fees going out to BMI and SESAC and has yet to come to terms with ASCAP. Once all that and the 2015 increases are factored in the cost to Pandora will be just about at the level proposed back in 2007 that would have killed the service. In theory, ad revenue available now and growing ought to be enough to cover those additional fees, but somehow I doubt it.
For those who haven't been following this story for the past few years, John Shinal's MarketWatch column has a good bit of history, going back to the time period when I thought Web radio was going to be killed off. It appears that they got an 8-year stay of execution but unless something changes radically I won't be holding any of their stock as a long-term investment.
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