Looks like you won't need to delete that Pandora app from your iPhone after all. Internet radio outfits finally struck a revenue-sharing deal with copyright holders, apparently defusing the fear that the previous fee structure would jeopardize the whole web radio shabang. Back in the spring of 2007, the federal Copyright Royalty Board more than doubled royalty fees on net radio stations for playing songs, arguing that the industry had to pay artists and labels. Many of those companies claimed that the new fees would erase nearly all revenue for their operations and put them out of business. Digital fights are nothing new, as Google's ( GOOG) YouTube and Apple's ( AAPL) iTunes music service can attest. But the CRB move came despite the fact that basic radio pays no such fee to play on its airwaves, while satellite radio stations like Sirius XM Radio ( SIRI) pay only a fraction. Pandora, one of the most beloved net radio sites, said that the projected fees would have come to 70% of its $25 million in revenue in 2008, according to The Washington Post. But in a bid to stave off just such a scenario, and after months of back and forth between webcasters and SoundExchange -- a nonprofit that collects copyright royalties for owners -- the two sides reached a deal. "For us, it's hard to overstate how significant this is," Pandora founder Tim Westergren said, according to The Associated Press. "It was either this or an ugly alternative."
According to a press release announcing the deal today, in addition to a minimum fee, larger services would pay either a per-performance rate or 25% of total revenue, whichever is higher. Smaller services, or those making less than $1.25 million in revenue, could pay either a portion of revenue or a fraction of expenses. The per-performance rate previously set for terrestrial radio broadcasters who also broadcast online was used for bundled, syndicated or subscription Internet radio services as well. "We believe the rates the CRB set were appropriate and fair," SoundExchange Executive Director John Simson said in a press release. "However, by incorporating an experimental approach whereby artists and copyright holders share in the growth of pureplay services, it gives certain pureplay webcasters the opportunity to flesh out various business models and the creators of music the opportunity to share in the success their recordings generate."