New CEO of Pandora will start turnaround of company through royalty renegotiation

September 12
6:38 AM 2013

In a report by the Associated Press, the newsgathering organization said new Pandora chief executive Brian McAndrews' biggest challenge in order to turn the company around would be the renegotiation of royalty rates it pays to the music industry. Pandora's 2009 royalty fee deal has been the benchmark for companies, including Apple.

"I do share Pandora's longstanding belief that musicians should be fairly compensated for their work. I'm confident we'll be prepared and do the right thing, McAndrews said. The Pandora CEO also said that he would be relying on co-founder Tim Westergren and outgoing CEO Joe Kennedy. Before his appointment Wednesday, he was former CEO of digital advertising company aQuantive. aQuantive sold to Microsoft in 2007 for USD6.3 billion.

The earnings in music royalties has been a pain in the neck for Pandora, who posted another quarter net loss through July even thought the company saw revenues increased by 55%. Pandora pays over USD214 million last year to record labels, musicians, artists and publishers alone. This amount was half of the streaming media company's revenue for 2013.

Pandora's copyright attorney David Oxenford points to Digital Millennium Copyright Act of 1998 as the reason why Pandora wasn't able to earn even if their number of users kept on growing. "I don't think anyone anticipated how the royalty decision would play out in the future," Oxenford said. "In 1998, you didn't have Internet radio." 

Oxenford also predicted that when hearings about the renegotiation start in January, the Copyright Royalty Board would allow Pandora and the music industry six months to work on a deal. 

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