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The other day I posted an article about Pandora's probably upcoming demise as a result of a royalty rate hike put in place by SoundExchange, which represents record labels and the artists signed to them. If popular opinion around the 'net is any indication, the issue is a lot larger than Pandora shutting down.

An Industry in Peril

It appears as though the entire Internet radio industry in in jeopardy as a result of this matter. This includes not only Pandora, but  popular sites like Slacker, Jango, and others. While inevitably hurtful to the industry anyway, SoundExchange may not have thought this decision all the way through. Dan Costa at PC Magazine writes:

Don't forget, vast illegal file-sharing networks are still operating just a few clicks away. The RIAA's legal Whac-A-Mole has barely slowed them down. If this unfair royalty scheme kills off legal, legitimate businesses like Pandora and the recently shut-down Muxtape, those users will simply go somewhere else. And that destination is more likely to be BitTorrent than a record store. The record industry may think it is killing off Internet radio, but it's merely opening Pandora's box.

Costa also noted that his father, an unlikely candidate for such technology use is even getting into Internet radio, emphasizing the type of effect the industry is actually having on consumers. Troy Wolverton at Mercury News has an interesting piece noting how well the industry is doing while its very existence is threatened.

A Solution? Not Likely.

Some believe that these Internet radio sites just need to find more ways to make money so they can actually afford to pay the royalties. Costa hinted at something along the lines of selling concert tickets. Others have suggested ramping up their advertising models. Even the head of SoundExchange suggests such a tactic. According to Wired, he's even a fan of Pandora and offered this suggestion:

Simson says Pandora and other internet radio sites need to start including audio ads -- even though they could drive listeners to alternatives that pay no royalties at all -- because people don't look at the graphic ads on Pandora as things stand, and will do so even less as internet radio extends into the car. He accepts that online radio stations play better, more varied music than their over-the-air counterparts, but wants them to adopt a similar, audio ad-laced format in order to pay SoundExchange what he says it deserves.

Simson doesn't seem to acknowledge or care that audio ads would annoy listeners and likely lead to them obtaining the music from illegal means from which SoundExchange would get nothing. Sites like Pandora have been a step forward in the battle against music piracy (perhaps a very small step, but a step nevertheless), and the people affected by the piracy the most wish to take a step back. I have to wonder how many less songs were illegally downloaded because of Internet radio.