Why internet radio will be throttled by rights holders

In light of the decision by Pandora to pull out of Britain, James Cridland has done the math on the "reasonable" demands of PPL/MCPS/PRS:

Paidcontent.co.uk reports that MCPS/PRS was asking for 0.085p per song per listener - which also appears on this PDF file on the MCPS/PRS website. PPL, in a press release about the Pandora closure, says they would charge 0.0561p 0.0773p per song per listener (the interactive radio rate). Pandora plays around 15 songs per hour.

Vordermanned out, this comes to:

Total music rights payments: 2.434p per listener, per hour.

Cridland then considers the established radio industry:

The latest figures from the UK’s Radio Advertising Bureau says that the commercial radio sector as a whole brought in £593m in 2007. The latest RAJAR figures show that commercial radio is listened-to for 441m total hours every week, or alternatively 23,018m total hours a year.

So… 23,018m total hours brings in £593m. Divide one by the other, and we find that, as a total industry average, commercial radio makes 2.57p per listener, per hour. And the revenue figures also include non-radio activity, like websites.

In other words: the rights holders want Pandora to be paying sums just shy of the established operators' entire turnover, just for rights. Never mind the other costs facing Pandora.

No wonder Pandora felt it couldn't afford to continue. It's up to you to decide if PRS-PPL-MCPS are shortsighted, greedy, or just hoping to screw as much cash out of the internet as they can before they're dumped and replaced with an organisation more suited to the new music world.

[Thanks to Alan C for the link]