Will Congress Save Pandora?

Sam Gustin writes: The music hasn't stopped. Action by Congress over the weekend gives Web radio fans hope that it won't anytime soon.

Six weeks ago, Tim Westergran, the founder of popular internet radio station Pandora, warned that his company was drowning under the weight of the royalty fees it must pay the recording industry.

This weekend, Congress threw Pandora a lifeline.

On Saturday, the U.S. House of Representatives passed the Webcaster Settlement Act, a bill that would give internet radio stations more time to negotiate better royalty rates than those instituted by the Copyright Royalty Board last year, which more than doubled the per-song fees.

The House vote was a big win for Pandora -- Westergen had sent out an "urgent" email Friday night asking the service's users to lobby their representatives to support the bill. The Senate may vote on the measure as early as Monday, and is expected to approve the bill.

For Pandora, passage of the legislation is essential because the deadline for the ongoing negotiations between Web broadcasters and SoundExchange, the group that collects royalties on behalf of the recording industry, was set to expire on December 15, when Congress is on recess.

Under the terms of the bill, the deadline has now been extended until February 15, 2009.

"After a yearlong negotiation, Pandora, SoundExchange and the RIAA are finally optimistic about reaching an agreement on royalties that would save Pandora and Internet radio," Westergen wrote. "The legislation would give us the extra time we need to finalize the deal."

Last month, Westergren said that Pandora was "approaching a pull-the-plug kind of decision," because it simply couldn't afford to pay the existing royalty rates, which he said will amount to 70 percent of the company's anticipated revenue of $25 million.

NPR, the national public radio organization, was instrumental in passage of the bill, according to News.com, by using its hefty clout on Capitol Hill. NPR was apparently able to muster enough support to convince the National Association of Broadcasters, which represents the the terrestrial broadcasting industry, to reverse its opposition to the bill.

"This legislation benefits all music webcasters and excludes none," said Michael Riksen, NPR vice president of policy and representation. "Passage will facilitate closure of an agreement to enable all public radio stations to continue their public service through the webcasting of music."

Assuming the Senate passes the bill Monday, the focus will shift to the Web broadcasters and SoundExchange. Now that the deadline has been extended, Pandora fans are hoping that both sides can make good on the pledge ensuring that the music won't stop.