Pandora, Growing Up Washington Style
In 2007, the Internet radio company faced new royalty rates that would have amounted to about 70 percent of the company's revenue, putting the fledgling start up out of business, said Westergren, Pandora's chief strategy officer.
"It was a disastrous outcome," he said.
So Pandora reached out to its users - for whom they conveniently have gathered names, zip codes and email addresses - and asked them to push their lawmakers to intervene. And then Pandora hit Washington to lobby. Congress eventually stepped in and passed the Webcaster Settlement Act, which gave Pandora and the recording industry a different royalty framework and time to negotiate a rate that would replace the government-imposed one. Pandora now pays royalties that equal about 50 percent of its revenue.
Since then, the Internet radio company has become ubiquitous. They have 150 million registered users in the U.S., according to company statistics. And, as of March, it was the second-most downloaded free iPhone app, following only Facebook. Eighteen car companies sell vehicles equipped with Pandora.
And they've grown up Washington-style, too. Pandora's royalty rate won't expire until 2015. But rather than wait around for another rate set under rules Westergren says are unfair, the Internet radio company is ramping-up its lobbying efforts. And it looks like they're preparing to take the fight to the Hill.