This Wednesday, we’ll finally learn what rates the US Copyright Royalty Board (CRB) is setting for webcasting royalties for the next five years.

It’s a decision that will have a massive impact on Pandora in particular: not just its likely domestic fortunes in the US, but its prospects for global expansion and its planned move into on-demand features.

(Not that the rates will apply beyond the US, but the response from investors will govern Pandora’s resources for its long-anticipated expansion.)

At one level, the situation is simple to understand. Pandora and services like it currently pay out $0.0014 to labels for every stream, but the company has been lobbying for this to be lowered to $0.0011.

Meanwhile, royalties collection body SoundExchange has been arguing for it to be raised to $0.0025. With hundreds of billions of annual streams on Pandora alone, the stakes are high: every billion streams on the service could be worth between $1.1m (if Pandora gets its way) and $2.5m (if SoundExchange prevails).

Lobbying is continuing right up to the CRB’s publication of its decision. Radio body the National Association of Broadcasters (NAB) continues to press for a lowering of the rates, for example.

“Streaming rates have risen at an unsustainable pace… While such rates have padded the bottom lines of record labels, these rates have proven cost-prohibitive for many radio broadcasters seeking to enter the streaming business,” claimed the body.

“The rates we proposed reflect what would happen in a true free market, which is what artists deserve under both the law and as a matter of fairness,” SoundExchange boss Michael Huppe told the New York Times, from the other perspective.

Analyst Alice Enders outlined the stakes for Pandora. “The core problem of Pandora is that under the existing rate structure they’re not making any money,” she said. “Anything other than the status quo is going to be dreadful for Pandora, because it means that the challenge for monetising content is going to be that much higher.”

The only firm conclusion as things stand: whatever rate the CRB sets, the resulting arguments will last into 2016.

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Stuart Dredge

Music Ally's Head of Insight

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