Pandora Is Boxed In by High Royalty Fees

The webcaster pays far more than rivals to artists and record labels
Pandora CEO Joe Kennedy Photograph by Justin Sullivan/Getty Images

Pandora Media, the rapidly expanding Internet radio service, has a problem: The faster it grows, the bigger the financial hit it takes on royalty payments. In the first 10 months of 2012, Pandora paid $182.1 million in music royalties, or 60 percent of revenue. With the music streaming company forecasting a fourth-quarter loss, and competition intensifying from SiriusXM, Spotify, and Apple, Pandora’s stock was off about 6 percent for the year while the tech-laden Nasdaq Composite Index advanced 17 percent.

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