After a half-decade of pivots, in early 2005, Pandora finally launched in its current form where it suddenly was taking off in popularity. The company offered internet radio, where by searching an artist you could get an endless stream of music for free. This allowed for the company to grow rapidly and by early 2007 it had over six million users
on the platform. However, after a couple of years of rapid growth, the United States government caught up to all of this musical content being shared online via streaming. To quote a 2007 Los Angeles City Beat article
(emphasis is mine):
Then, on March 6, the other shoe dropped. On that day, the obscure Copyright Royalty Board at the Library of Congress made public a long-awaited ruling instituting a tenfold increase in performance royalties that must be paid for streaming songs on the web – and, more important, made those payments the same for commercial and non-commercial sites alike.
This single decision represented an existential threat for internet radio broadcasters across the spectrum. Non-profit stations feared that such an uptick in payment would effectively drive them out of a hobby, which gave them an odd partner in the venture capital-backed for-profit online radio: Pandora. The company had just spent nearly five years searching for a business model and now that it found one—advertisement-based music streaming—its costs were on the brink of skyrocketing, threatening to sink the company.
“Overnight our business was broken,” Westergren told the New York Times
back in 2010. “We contemplated pulling the plug.” Just to linger for a second, if a company floated on years of unpaid labor, praying for venture capital welfare, and is suddenly on the brink of collapse under threat of a pay increase to its workers (the musicians that power the platform), then I’d question much of what, if anything, is salvageable about this business.
Pandora needed to not only show that it could survive this potential ruling, but also still push towards becoming a profitable company that its investors could eventually leave in order to hit their big payday. The company got aggressive and hired Qorvis Communications
, a Washington D.C. based lobbying firm that worked with Amazon and AOL as well as with Halliburton and the Kingdom of Saudi Arabia
—so only the highest quality of clients. The company pulled together AOL, Pandora, Yahoo, and a number of other web broadcasters to fight the Copyright Royalty Board ruling through a fairly aggressive public relations campaign
to highlight smaller broadcasters who might’ve been hurt by the ruling. Its effort didn’t fall on deft ears, as Qorvis built up positive press coverage
, got artists to lobby politicians on behalf of the company, and even got Pandora customers to flood thousands of emails towards congress members.
While the Pandora-backed Internet Radio Equality Act
(that would’ve reversed the initial 2007 CRB ruling) never passed through congress, after a couple years of lobbying Pandora were successful in reducing the royalty increase
. The royalty increase could’ve been dire from the point of view of smaller web broadcasters, but it speaks to a larger issue wherein non-profit broadcasters work with venture capital-backed for-profit corporations against the interest of record labels, which then impacts the artists that are employed by those companies. A decade later, artists remain even further atomized within their business, while Pandora has gone on to IPO at $2.6 billion
, all off of the backs of underpaid employees, musicians, and aggressive political lobbying against the best interests of musicians.
However, joy could never last too long for Pandora. Rather quickly, the company started to see the real issue of too much of its revenue getting pushed back towards record labels. The catch-22 situation was that with increases in listening hours Pandora would be forced to pay out more money to record labels, and its growth in users wasn’t matching how much revenue they were making on users. This struggle continued throughout much of the 2010s and with an additional increase in competition from Apple Music, Spotify, YouTube, and other platforms entering the market. The company floated in constant precarity with stagnating growth and eventually ended up being sold in 2018.