"Pandora now has a sustainable business model," said Sonal Gandhi, music media analyst at Forrester Research. Of the $50 million that Pandora took home in sales last year, $30 million was spent on royalty payments. Westergren said the royalty fees had been an "albatross," since the company's costs literally rise every hour as the site gains popularity. After two years of back and forth, Pandora finalized a deal with SoundExchange, the organization that collects royalties on behalf of the artists and recording industry. Pandora had been hindered by the high royalty fees it has to pay artists to stream their songs, but the company finally succeeded last summer in its long fight to lower those fees. "We've gone out of business many times, so it definitely wasn't a smooth path, but we're starting to realize the benefits of scale."Ġ:00 / 2:38 Pandora's founder out of the box "We've been able to grow our audience to attract advertisers and do so without going bankrupt," Westergren told. Company founder Tim Westergren said Pandora has finally managed to strike just the right balance. As more users listen to Pandora, the company has found itself doling out more in royalties. With a rapidly increasing number of subscribers, Pandora has been able to attract better advertisers and demand higher ad prices.īut growth is a double-edged sword. The company attributed its ability to rise through the rubble to its substantial user growth over the past year. Analysts say even mighty MySpace Music may be unable to sustain itself for much longer. Social music site iMeem was scooped up by MySpace in December for just $1 million, and Apple ( AAPL, Fortune 500) bought cloud-based music service Lala for not much more. Pandora certainly seems to have found its sweet spot, making it a standout among other streaming services that have not been able to make it on their own.
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