SoundExchange

Pandora's share price is down 50 percent from its high but is still "dramatically overvalued," says one of the leading Wall Street tech analysts.

The company's stock was trading at just under $13 this morning, down from a high of $26. But Rich Greenfield, an analyst with BTIG Research, writes that "our conviction level in our sell-rated investment thesis has increased."

In a blog post titled "Why we would continue to short Pandora stock--remains dramatically overvalued" Greenfield said the Web's top radio service is worth "at best" $5.50 per share.

Pandora enables users to choose their favorite artists and musical genres and based on those choices the company uses an algorithm to determine what music to play. That is the limit on the control Pandora users have on what they hear.

The company offers an ad-supported service that is free of charge to users but limits them to 40 hours of free listening per month. Another service, called Pandora One, costs $36 annually and offers unlimited commercial-free listening. Since most of the users choose the free-of-charge service, advertising is vital to Pandora and lately it seems that the company is selling more of them.

One problem with that is throwing too many ads into the listening experience means Pandora risks alienating users, especially when YouTube and Vevo enable visitors to listen to music free of charge as well as the ability to listen to the same song over and over again, fast forward or reverse, and do so often without being pestered by any ads at all.

Pandora's real problem though is that the business model doesn't appear to scale well. Pandora must pay SoundExchange, the company that collects royalties on behalf of music creators, each time someone listens to a song. The larger Pandora's audience gets, the higher its costs.

In June, a SoundExchange spokeswoman explained Pandora's position this way "Because the rate they pay is based on per-spin, more listeners doesn't make them more profitable. It doesn't solve their problems. They have to make each listener more profitable." … Read more

Pandora is one of the Web's most popular and beloved music services, and smart investors shouldn't go anywhere near the company's stock.

Shares of the profitless radio service began trading today on the New York Stock Exchange as part of an initial public offering, the latest technology play with a questionable business model to test the public equity markets.

In early morning trading, Pandora, which trades under the ticker symbol P, was up 28 percent to $20.37 a share but then began to level off. Investors began pulling back not long after and the stock closed the day at $17.42, up 8 percent. According to Bloomberg, Pandora sold 14.7 million shares yesterday at a price of $16 a share, giving the company a valuation of $2.6 billion. Pandora isn't worth $2 billion and here's why: … Read more

Illegal file-sharing services aren't the only ones getting kicked off the Internet for failing to compensate artists.

SWCast Network, a company that hosted a platform for Internet radio stations, was recently taken offline for violating the Digital Millennium Copyright Act (DMCA). The company was accused by SoundExchange, a nonprofit that collects royalties on behalf of the music industry, of failing to compensate them since 2005.

Citing the requirements in the DMCA, SoundExchange requested that SWCast's bandwidth provider cut off service to the Webcaster. SWCast went dark two weeks later, on April 17. This was the first time in … Read more

For years, Pandora and other Web radio stations fought to reduce the royalty rates they were required to pay artists and record labels.

Last July, the music industry and Webcasters reached an agreement and it now appears both sides are reaping the benefits. On Friday, SoundExchange, the group appointed by Congress to collect royalties on behalf of artists and copyright owners, said it has begun distributing $51.7 million, the largest quarter the nonprofit group has ever recorded.

The amount represents a 135 percent increase over the same period last year and is nearly $10 million larger than the previous … Read more

Getting paid for digital downloads from iTunes, Amazon, or other stores is pretty straightforward. The artist or label submits songs for download, perhaps through a distributor like TuneCore or The Orchard. Each time a user buys a download, the store takes its cut, the middlemen take their cut, and the artist gets the remainder.

But there's another potential source of revenue that a lot of artists are missing out on: streaming Internet music. This includes thousands of standalone Internet radio stations, personalized radio services like Pandora and Slacker, and broad-based distributors like MediaNet. Here in the United States, a … Read more

Internet radio got a break Tuesday when the sector reached an agreement on streaming-music royalty rates with SoundExchange, the group that collects royalties on behalf of artists and labels.

The two sides announced the deal, which comes after more than two years of negotiations, political maneuvering, and fans pleading with lawmakers to save Webcasting. It should be noted, however, that Webcasters are still at a disadvantage when competing with traditional broadcast radio. Over-the-air stations aren't required to pay royalty rates to artists or labels.

Steve Marks, an executive vice president for the Recording Industry Association of America and one … Read more

Few people know this but for a little while last year, the music-royalty rates that Web radio stations have complained about for years appeared to be behind them.

In a midtown Manhattan law office last November 6, representatives from Webcasting companies and SoundExchange, the group that collects royalties for recording artists and labels, struck a deal "in principle," said sources familiar with the negotiations. The agreement was designed to restructure the royalty rates Webcasters have long said would decimate the sector.

But a week ago, came word that a final deal was never signed. The Digital Media Association (DiMA), the group that represents most of the largest Webcasters, including Pandora, Live365 and Yahoo, announced that the parties failed to reach an agreement. How could that happen? Both sides told members of Congress in September that they were close to a deal. In November, the blog All Things Digital reported a settlement was within grasp and quoted Pandora founder Tim Westergren saying "all the hard stuff has been done."

After interviewing multiple sources on both sides of the issue, the picture that has taken shape is that Webcasters blew a golden opportunity to reach an accord that would have given them much of what they asked for. What appears to have happened is that some in Webcasting were willing to play a game of brinkmanship with SoundExchange. At the very least, the actions of some larger Webcasters undermine their claims that they can't afford to continue for much longer without a settlement.

There is still a chance the two sides can come to terms. Talks are ongoing. But as it stands, time is quickly running out and nothing has occurred to indicate a breakthrough is near, according to sources on both sides. If a settlement isn't reached, its conceivable that some Web radio stations that legitimately can't afford to pay the performance fees set by the Copyright Royalty Board (CRB) two years ago may be in jeopardy. Representatives from SoundExchange declined to comment. Westergren did not return repeated phone calls.

Did Real want a deal? There's no doubt who the music side blames for derailing the agreement. … Read more

Technology companies are supposed to be wide-eyed novices on Capitol Hill. I've read that they don't spread enough money around or aren't hip to the ways of Washington.

Regardless of whether that's true, this weekend saw Pandora, a struggling music service, whip up enough support among fans of Web radio to help persuade the House of Representatives to unanimously pass the Webcaster Settlement Act on Saturday, according to multiple people associated with the bill. The proposed legislation is designed to give Internet radio stations added time to negotiate a settlement with the music industry on reduced … Read more

Update at 5:50 p.m. PDT: The House actually did weigh in on the bill on Saturday, passing it unanimously by a voice vote.

Proponents of Web radio stations are predicting a very close vote in Congress on a bill that they paint as life or death.

The House of Representatives is set to vote Sunday on the Webcaster Settlement Act, which would allow Web radio stations to negotiate with the music industry for a royalty rate lower than what Congress mandated last year.

Companies like Pandora are seeking a reduced rate and say that they simply cannot afford … Read more