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Tightwad music spaffer Pandora opens box for Wall St to fill with cash

Takes breather from kicking penniless songwriters to plead for more dosh

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Controversial webcaster Pandora, under fire for running its music streaming business with the iron grip of a plantation owner, is returning to Wall Street for a cash injection.

The company floated in 2011 and its popularity (it has 70 million listeners), revenues (up 55 per cent year on year) and share price (now almost $25) have grown in the last year. Pandora and its largest investor could raise up to $279m – much needed when its cash pile has dwindled to $69m, down from $89m last quarter.

Pandora has been compared to the 1890s robber barons, who unleashed paid thugs to break up unionising labour. But why?

Songwriters earn just $0.00006 per play on Pandora – and these payments to songwriters make up just four per cent of Pandora's "content acquisition" costs. But Pandora thinks this is far too much, and it has filed a lawsuit to slash the statutory rate – a price the government controls in the United States – while lobbying Congress in support of the move. It’s also bought an FM radio station to take advantage of a loophole in the law relating to royalty payment rates.

In a letter to the company in July, Pink Floyd’s members wrote: “A business that exists to deliver music can't really complain that its biggest cost is music. You don't hear grocery stores complain they have to pay for the food they sell,” pointing out that “Netflix pays more for movies than Pandora pays for music, but they aren't running to Congress for a bailout."

Pandora has a point when it notes that US terrestrial radio pays less per-play than satellite or internet radio, but this is changing. The view persists that Pandora is attacking the poorest part of the supply chain simply because it’s the weakest, while the tech bloggerati – which is still furiously fighting the analog-era Man of the record companies – provides cover for the strategy.

Pandora could increase revenue by selling more advertisements (from one per hour to two), or by charging more for them, or by bundling the service into more distribution channels, or by throttling the “free” option and focussing more on paid users. Or a mixture of all the above: it isn’t short of alternative options.

Last year it emerged that founder Tim Westergren is selling $1m of his shares a month, which should see him finally cashed out by 2015. ®

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