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For a while it was starting to look rather iffy as to whether or not Pandora, as well as internet radio in general, was going to be able to continue, or die a sad death.  The cost of keeping it afloat was simply getting too high in the face of the streaming rates for Internet radio.  But now, artists, record labels and webcasters have finally come to an agreement, according to Pandora’s Tom Conrad.

“Pandora is finally on safe ground with a long-term agreement for survivable royalty rates,” Conrad says.

So, what does this long-term agreement consist of?  SoundExchange agrees to a 40-50% reduction in the per-song-per-listener rate, or Pandora giving up a 25% share of its US revenue, whichever is higher.  The new agreement runs through 2015.

But, that’s not all and the rest of it is where it affects the users.  Because the rates are still higher than they can apparently easily handle without other changes, they are starting to implement a fee for usage for some users.  They say this will only affect 10% of the user base. 

What it boils down to is, if you use Pandora more than 40 hours a month, it will cost you $0.99 to continue using the service and go to unlimited.  If you choose to do this, you are not signing up for a self-renewing subscription of any kind.  Each time you do so is a one-time thing.  If you already use Pandora One, which is the pay version of the service, you are already in the clear, and already have unlimited (ad-free) listening obviously.

Emails have been sent out to listeners that seem to be in danger of going over the 40 hours based on their usage history, letting them know about the upcoming changes.  (Thanks to GTell’s Natesh Sood for this alert!)  Pandora also let current users know in the email about the options that would be available to them should they go over the 40 hour cap. 

Pandora is still hoping to be making a profit by this time next year, and hoping that these changes might assist in the goal of seeing them get there.  “It’s a great outcome. Expensive, but I think we can still be profitable next year. These are workable rates,” Conrad says.

Not all Pandora users are as happy about the upcoming changes as Pandora seems to be.  In comments posted around the web I’ve been reading mixed reactions to the news.  “Lex” states “geez.. people are so naive. If you know the details, the deal itself is horrible. Why would Pandora stick in a 40 hour listener cap otherwise? Everybody cheered the Imeem deal at first too, look where they are now. safe ground indeed” 

And where the complaints really have start to have some merit is the fact that come 2015, it seems all hell may break loose with this new little deal that is making everyone all happy now.  Because it may be that the crafty little deal Simpson worked up for SX does a whole lot for SX and not so much for Pandora.  Quoted from the SX agreement:

Bundled Services: The rates for commercial webcasters providing bundled, syndicated, subscription services are to be the same as the rates agreed to by the National Association of Broadcasters (NAB)

rates for
2010 0.0016 per performance
…
2015 0.0025 per performance

So feasibly, come 2015, Pandora may be stuck with fees they can’t afford to pay, and have to get rid of the Pandora One and the $0.99 subscription services, and users are gonna get slammed.  Bye-bye Pandora.  All in all you’re just another brick in the wall.

Read: [techcrunch]