• Ars Technica, Monday, August 18, 2008 11:15 AM

One of Internet radio's most successful services is on the verge of pulling the plug, Ars Technica reports. Thanks to the hefty Internet royalty rate hike pushed through by SoundExchange last July, Pandora founder Tim Westergren says the music subscription service won't last beyond the first round of payments.

As Ars points out, SoundExchange heaped massive royalty hikes on Internet-only radio stations, imposing per-user fees for each song. Worse, these royalties are set to double for big stations by 2010 to an estimated 2.91 cents per hour per listener. Satellite stations, meanwhile, pay just 1.6 cents, and radio stations have a different royalty structure altogether.

Despite its best efforts to petition SoundExchange's tough decision, Pandora's pleas have fallen on deaf ears. According to The Washington Post, Rep. Howard L. Berman (D-Calif.) is attempting a last-minute deal to save Internet radio -- a deal that would lower the per-song rate set last year -- but he isn't optimistic. "If (the negotiations don't) get much more dramatic quickly, I will extricate myself from the process," Berman said. What does this mean for Pandora? The music service will now have to pay 70% of its projected 2008 revenue of $25 million. As Westgren told the Post: "The moment we think this problem in Washington is not going to get solved, we have to pull the plug because all we're doing is wasting money."

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