Pandora: Royalties Kill the Web Radio Star? (A)

Abstract:     
Joe Kennedy, president and CEO of Pandora, one of the largest and most popular web (internet) radio broadcasters, had just received bad news. The Copyright Royalty Board (CRB) had announced its decision to increase the royalties required to be paid by the web radio industry by 2.5 times over the next five years, effectively pushing profitability for Pandora out of sight. Pandora was a "webcaster" that was based on the Music Genome Project, which codified various attributes of a song (making "music DNA"). Using this technology, Pandora could provide a selection of songs with similar "music DNA" to the user's initial choice. Pandora, however, along with other webcasters, was subject to a special statutory scheme regarding royalties, which were higher than the royalties for satellite radio and from which AM/FM radios were totally exempt. This case examines issues of copyright, the economics of new media, and the specialized laws established to regulate a new subset of an existing industry.

Working Paper Series