For Pandora, Ruling on Webcasting Royalty Rates Is Crucial

Since it began 10 years ago, Pandora Media has become one of the most popular digital music services in the world, with around 80 million regular users. But it has never had a profitable year, its user growth has slowed and lately Wall Street has become impatient.Now Pandora is steeling itself for a legal decision that may have huge consequences for its business and for the evolving economics of digital music.The Copyright Royalty Board, made up of three federal judges in Washington, is set to rule by Tuesday on the royalty rates that webcasters like Pandora will pay record companies for the next five years. These royalties are Pandora’s single biggest expense — they amounted to 44 percent of the company’s revenue last year — as well as its biggest hurdle to profitability.

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