Faced with rising royalty costs, Pandora will limit the amount of free music that its users will have access to on mobile devices.
In a blog post on Wednesday, Tim Westergren, the founder and public face of Pandora, said that a limit of 40 hours a month on mobile devices would take effect this week for its free service. The change, he said, would affect less than 4 percent of its more than 65 million regular customers, since its average listener spends about 20 hours a month on the service.
To continue listening, Pandora’s mobile users can upgrade to its $36-a-year paid version or switch to listening via computer. A spokeswoman for the company said the move was most likely temporary, but that it had no plans for lifting the limit.
The reason Mr. Westergren gave was the rising cost of its music licenses. Its per-song royalty rates have increased 25 percent over the last three years, he said, and are to go up 16 percent over the next two years.
“After a close look at our overall listening,” he wrote, “a 40-hour-per-month mobile listening limit allows us to manage these escalating costs with minimal listener disruption.”
The cost of music has been a persistent issue for Pandora, which by law pays a fraction of a cent in performance royalties each time a song is played on the service. That has tended to amount to 50 percent to 60 percent of the company’s revenue; it also pays a much smaller portion of its income to music publishers.
More than 75 percent of the listening to Pandora is on mobile devices, but while the company pays the same royalty for both desktop and mobile listening, advertising rates on phones and tablets is lower.
Last year, Pandora, along with Clear Channel Communications and various technology companies, supported the Internet Radio Fairness Act, a Congressional bill that would have changed the process by which a panel of federal judges sets the royalty rates for Internet radio services. The bill — and Pandora — came under aggressive criticism from the music industry and has not been reintroduced under the new Congress.
In an attempt to lower its publishing costs, Pandora last year also sued the American Society of Composers, Authors and Publishers, or Ascap, one of the major performing rights organizations. That case is pending.
Ben Sisario writes about the music industry. Follow @sisario on Twitter.
Article source: http://mediadecoder.blogs.nytimes.com/2013/02/27/pandora-to-limit-free-listening-citing-royalty-costs/?partner=rss&emc=rss