Pandora was reportedly bowing to record label pressure over the use of its service abroad at a time when internet radio is fighting for its survival. The Copyright Royalties Board, a panel of judges which reports to the US Congress, has increased the fees online broadcasters must pay.
Online radio companies have claimed that the increase in fees will put them out of business, but they have just won a reprieve, as the CRB has delayed the implementation of the new rule by two months.
Instead of coming into effect on 15th May the new royalty rates, which web broadcasters say are up to three times higher than previous ones for some firms, will come into effect on 15th July.
The delay gives the companies more time to lobby Congress to overrule the CRB or pass a new law setting lower rates. A new law has already been proposed that would overturn the CRB ruling and fix rates at a level more companies could afford. Called the Internet Radio Equality Act, the bill was introduced by Democrat Jay Inslee and Republican Don Manzullo.
Speaking last month to OUT-LAW Radio, Joe Kennedy, chief executive of Pandora, said that the threat to online radio was severe. "The judges adopted the proposal to triple the rates for large webcasters, and for small webcasters it's actually closer to a 12-times increase in the rates that they pay," said Kennedy. "It's an extraordinary increase in the rates that will effectively kill internet radio as we know it today."
"Over 90% of internet radio will simply be gone. The net result will be a huge loss of diversity, a huge loss for music artists and a loss of virtually all of the internet radio that exists," said Kennedy.
Pandora is one of the biggest online radio stations, and it says that it can no longer broadcast its service outside of the two countries where it has negotiated licences, the US and the UK.
"Unfortunately, there is no license outside the US and there is no global licensing organization to enable us to legitimately offer Pandora around the world," company founder Westergren wrote to users. "Other than in the UK, we have not yet been able to make significant progress in our efforts to obtain a sufficient number of international licenses at terms that would enable us to run a viable business."
The company said that it would start identifying illegitimate users by their internet addresses. "Until now, we have not been able to tell where a listener is based, relying only on zip code information provided upon registration. We are now able to recognize a listener's country of origin based on the IP address from which they are accessing the service. Consequently, on May 3rd, we will begin blocking access to Pandora to listeners from your country. We are very sad to have to do this, but there is no other alternative," wrote Westergren.
