December 16, 2015 Last Updated 9:49 am

Copyright Royalty Board raises royalty rates for streaming music services like Pandora

Pandora’s rate goes up 21%, calling into question whether the company, which has already lost $140 million this year, will be able to survive… but investors actually expected far worse

The Copyright Royalty Board may have just dealt Pandora a death blow with its ruling this afternoon that royalty rates for streaming music are to go up. Not all services will be effected as many, like Apple Music and Spotify, negotiate directly with the labels. But Pandora, which is considered a radio service, pays the CRB’s going rates… and those are going up.


“The rate for commercial subscription services in 2016 is $0.0022 per-performance. The rate for commercial non subscription services in 2016 is $0.0017 per-performance,” the board announced this afternoon. “The rates for the period 2017 through 2020 for both subscription and non subscription services shall be adjusted to reflect the increases or decreases, if any, in the general price level, as measured by the Consumer Price Index applicable to that rate year, as set forth in the regulations adopted by the Judges’ determination.”

Pandora would pay 17 cents per 100 streams, an increase of 21 percent over the company’s current rate of 14 cents per 100 streams. You can imagine what a 21 percent increase in costs will have on the company’s bottom line, which is not that good to begin with. Despite huge gains in revenue, the company through its third quarter had lost $150M, well more than three times the level of losses it recorded through three quarters last year.

Pandora cancelled a conference call scheduled for today as it evaluated how it wants to respond to the ruling.

Investors, meanwhile, are driving the stock up. Really.

Shares in the streaming service are up 19 percent in after-hours trading. Such was the dread concerning this ruling that many believed the rates might go even higher. SoundExchange, the nonprofit entity that collects digital royalties for the record industry, had called for the rate to be set at 25 cents per 100 streams, nearly doubling the rate.

In the past two days of trading, before the CRB’s ruling, Pandora stock had been falling, so the ruling was seen by some as a bit of relief: it could have been worse. (Wall Street reacted the same way to today’s Fed ruling, raising interest rates for the first time since the fiscal crisis. The Dow closed the day up over 224 points.)

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