For years, internet radio insiders have warned that internet royalty rates are too high to allow innovators to flourish. Now, Pandora, one of the most popular interactive music streaming sites on the internet, has been forced to lay off 20 of its 140 staff members, due to those rates compounded by today's weak advertising climate.
"This is a very sad day for Pandora, and for me personally," wrote Pandora founder Tim Westergren in a note posted Thursday to the company blog. "Today we reduced our staff from 140 to 120 employees. Like virtuallyevery company, Pandora is not immune to the challenges presented by thecurrent economic turmoil."
Westergren told me his company was in danger of being shut down completely
by its backers when I interviewed him for a keynote address at theDigital Music Forum West conference in Hollywood, California a coupleof weeks ago, so this represents good news in comparison to that dire scenario.
Indeed, despite the news, all is not gloom and doom for the webcaster.
"There are tough times ahead for the economy, but our listenership isgrowing rapidly, the Internet radio royalty rate resolution seemsfinally near, and the explosion of mobile devices like the iPhone areopening up a world of opportunity for internet radio to expand off thedesktop," added Westergren. "Moreover, our ad sales are growing so wellthat, not only did we not make any reductions there, we need tocontinue to hire more. It's just hard to be excited about all thattoday."
Pandora's prospects are still bright, assuming the factors Westergren mentions above are strong enough that the company is able to stay afloat without inserting audio ads into its interactive streams that could drive listeners to alternate sources for music that pay no such royalties, such as P2P sites and music blog aggregators.
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