International expansion through licensing is a multi-billion dollar business; but diverse licensing schemes are sometimes an obstacle.
As reported in paidcontent.org, The just-filed IPO documents by Pandora Media show a company on the rise. The popular web radio service served up more than one billion (yes, with a ‘B’) listener-hours in the final quarter of 2010—a five-fold usage increase in two years. But read the S-1 with the term “copyright” highlighted—as I just did—and you’ll also see some big challenges for Pandora and any other web radio services that hope to make it big.
Pandora wants to go global, but its business model relies on copyright rules that are unique to the U.S. If the bad news for a service like Pandora is that it has to pay big fees to copyright owners, the good news is that paying those fees is relatively straightforward. That’s because the fees are paid under a “statutory licensing” scheme. Pandora can make copies of any legally released sound recording on its servers and stream them online, as long as it pays those fees. It doesn’t have to negotiate with every individual record label. But in other countries, the negotiations are more complicated. For now, Pandora acknowledges that without U.S.-style statutory licensing laws, moving into other countries is prohibitively expensive.
There’s still plenty of growth Pandora can do in the U.S. But in the long term, they’ve got to solve this international copyright problem. With 80 million registered users, more than one-third of U.S. internet users are already signed up at Pandora. Not all those registered users are active, but Pandora is probably going to reach a tipping point at which basically any potential U.S. users have heard about the service and made their choice to either use it or not. The advertising market is competitive and they can only raise rates so much; to really keep their stock price moving, international expansion will become vital at some point.
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