After many months of uncertainty and endless questions surrounding the long term viability of the ad supported internet radio model, an agreement has finally been reached.
In an agreement set to run through 2015 Pandora will now see a 40-50% reduction in the per-song-per-listener minimum rates and will now have to pay this new reduced rate, or a 25% kickback based on U.S. income, whichever is greater. Although Pandora CTO Tom Conrad thinks this is “expensive” he is still confident that these rates are workable enough to be profitable next year.
What does this mean for end users of the product? For 10% of the heaviest listeners it will mean that they now have to pay $.99 for any month in which they exceed the newly implemented 40 hour listening limit. This new program is said to be opt-in and typical users will carry on as usual, while the heavy users will have the option to continue on each month.
What can we expect for the future? CEO Tim Westergren says that “Pandora is finally on safe ground with a long-term agreement for survivable royalty rates. This ensures that Pandora will continue streaming music for many years to come!”
There will surely be continued debate on the level of competition between these “free” ad supported internet radio companies and “satellite radio” but, with the release of the Sirius XM iPhone application (which has been downloaded over a million times) and their own premium internet radio offering, the lines are certainly becoming more blurred. What is seemingly not up for debate is the long term viability of the likes of Pandora, but only time will tell.