Pandora "on the verge of collapse"?

"We're approaching a pull-the-plug kind of decision. This is like a last stand for webcasting." - Tim Westergren, Pandora founder

Bagel Radio's blog lead me to this article in the Washington Post, where Pandora's founder talks of the looming end for the popular streaming music site. As Bagel Ted puts it:

The success of Pandora's iPhone application, which has attracted tens of thousands of new Pandora users per day, may be the company's downfall -- the more listeners webcasters like BAGeL Radio and Pandora attract, the more it costs in bandwidth and royalty payments, but that does not yet translate into increased revenues, leaving webcasters in a pickle. Today's laws, rates, and marketplace conspire to require webcasters stay small in order to survive.

This issue of streaming radio and royalty rates has been ongoing, and the Post article hints at one possible sign of hope:

This week, Rep. Howard L. Berman (D-Calif.) is trying to broker a last-minute deal between webcasters and SoundExchange, the organization that represents artists and record companies. The negotiations could reduce the per-song rate set by the federal panel last year.

The two sides appear to be far apart, however, with Berman frustrated.

At this year's Bandwidth conference, MOG founder David Hyman discussed how current royalty rates make it a losing effort for websites to provide streaming music. He theorized that lowering the rates would mean more sites jumping on board and ultimately more profit for everyone, calling it, "A big unknown we haven't tested."

In fact, this issue has been discussed at both Bandwidth conferences I've attended, and I imagine it will be one up for debate for some time now. In the meantime, I better listen to my Pandora stations while I still can.