Via the Daily Swarm, a WashPost story about Pandora on the edge:

Pandora is one of the nation’s most popular Web radio services, with about 1 million listeners daily. Its Music Genome Project allows customers to create stations tailored to their own tastes. It is one of the 10 most popular applications for Apple’s iPhone and attracts 40,000 new customers a day.

Yet the burgeoning company may be on the verge of collapse, according to its founder, and so may be others like it.

“We’re approaching a pull-the-plug kind of decision,” said Tim Westergren, who founded Pandora. “This is like a last stand for webcasting.”

Webcasters like Pandora and SoundExchange, which collects moneys from web radio for artists, are in a high-stakes battle over how much the stations should kick back, and stories like this on one level are just part of the PR campaigns that emanate from both sides. That said, it’s obvious that the copyright board’s per-song per-listener royalty structure is flawed, benefiting as it does larger companies. Royalties flowing back to the artists and labels should be based on a percentage of a company’s revenues. It’s not  hard to see where this is all going:

1) The music industry uses its ferocious lobbying power to get laws or regulations that break its way
2) As a result, promising new models for the industry get stifled
3) What do survive are big-money operations that screw their customers and get in bed with the industry
4) The result is an inferior version of a potentially superior product—in this case for example “internet radio” that sounds a lot like “Clear Channel radio,” laden with commercials and compromised by payola or its equivalent

In the old days, that would be the end of the story. Today, of course, it’s not. It just means listeners will gravitate to illegal downloading and sharing and passing around music with no royalties at all for the artists. Here again, the industry, with a screw-the-customer mentality deep in its DNA, is busily trying to charge people more for a crummy product when the audience has a better one available free.