Updated: Pandora Says Rates Still Too Costly For UK Re-Entry

Pandora (NYSE: P) quit the UK in 2008, citing excessive music streaming rates. A year later, PRS For Music, noting similar concern, slashed the rates.

Now those rates are due for renewal in June 2012, Pandora founder Tim Westergren tells paidContent the economics of UK music streaming still prohibit Pandora returning to the UK

“We’ve seen no indication from PRS that it is prepared to offer economically viable rates for services like Pandora.

“The current rate demanded by PRS of 0.065 pence per listener per track equates to 47 percent of the revenue Pandora achieved on a per listener per track basis in the year we just completed, during which we generated $274 million in revenue and were the clear leader in monetizing internet radio.

“Ultimately it is UK songwriters, artists and consumers that are hurt by PRS’ position. Because these rate demands keep services like Pandora out of the UK, internet radio listening in the UK has not gained mainstream adoption.

“According to Rajar, the official body for measuring radio audiences in the UK, the total number of hours spent listening to internet radio in the U.K. in the fourth quarter of 2011 was 35 million [per week: see update below]. By contrast, Pandora alone streamed 975 million hours in the U.S. in just the most recent month.

“Put another way, the number of internet radio hours streamed by all services in the UK in a quarter is roughly equal to the number of Internet radio hours streamed by just Pandora on a single day.

“Moreover, according to Rajar, UK internet radio listening in the fourth quarter grew only 10 percent versus the same period of the prior year. By contrast, Pandora listening grew over 100 percent versus the prior year.

PRS’ demands effectively deny songwriters and artists a new income stream and deny U.K. consumers access to services that would enable them to discover and enjoy music they love.”

Westergren’s ongoing reluctance to return to one of the world’s hottest music markets makes Pandora one of the few online music services not to embark on internationalisation, at a time when Spotify, Deezer, Rhapsody and others are expanding rapidly in to new territories including the UK, Germany and Australia.

PRS For Music tells paidContent the UK current rates, due for expiry on June, “will be reviewed this year” and informal discussions with online services routinely take place.

But, unlike in 2009, when Last.fm and others joined the throngs of services demanding cheaper rates from the royalty agency, so far Westergren’s sounds like the only voice speaking up so loud for a further downward revision.

“There is no sense of urgency on most people’s parts,” Steve Purdham, CEO of the music streaming service We7 tells paidContent. “Not just the PRS, but there is already an OML (online music license) on the table which for the UK seems reasonable from the PRS,”

“Services are always trying to bring costs in line with market realities. The reality is that all digital rates are out of kilter with the economics of the digital market, making any ROI minimal.

“So, when I say ‘reasonable’, I mean in the context of where we are in the historical journey. There still needs to be movement, but I have confidence it will happen over time.”

As “radio” services, We7 and Pandora would be paying PRS’ “interactive webcast” rate – cheaper than the on-demand streaming rates supposedly paid by services like Spotify.

Backed by Peter Gabriel, Eden and Pentech amongst others including Purdham, We7 last year repositioned out of the on-demand segment toward radio-like, Pandora-like personalised streaming, believing consumers don’t always have an appetite to make their own listening decisions.

Update (March 28, 2012): Rajar CEO Jerry Hill tells paidContent:

“The numbers they quoted regarding internet listening in the UK in the fourth quarter last year are on the low side.

“The actual number was 35 million hours per week , not 35 million hours for the quarter as Pandora had quoted you.”