Pandora, a popular web radio service, has indicated that the burden of royalty payments under a new rate schedule imposed by rates agent SoundExchange could force the company's closure, according to a report in Saturday's (8/16) Washington Post.

Pandora founder Tim Westergen indicated to the Post that an estimated 70% of the company's revenue for 2008 will go to royalty payments, leaving minimal cash to support the company's operations and return any margin to investors of the venture-backed startup.

Under a ruling by a federal panel last year, per-song performance royalty rates for web-based broadcasters doubled, while terrestrial broadcasters maintained their freedom from obligation of that royalty.

U.S. Rep. Howard Berman (D-CA) is attempting to forge a late compromise between SoundExchange, which represents artists and record companies, and web broadcasters, but both sides remain far apart on key points, according to the Post.

Westergren sees the situation as untenable for Pandora unless the royalty burden can be eased. "We're losing money as it is," he told the Post. "The moment we think this problem in Washington is not going to get solved, we have to pull the plug because all we're doing is wasting money."

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