Internet radio saved... at a price

Music nerds have been bemoaning the imminent demise of Internet radio for years now, as the specter of exorbitant royalty rates (higher than those paid by broadcast radio stations) has been haunting the industry ever since a key law expired, leaving web radio in the lurch. Late last year, a collective sigh of relief was let loose as the industry said it was nearing a royalty level it could work with -- though the numbers involved had yet to be finalized.

Now, they finally have, and the new royalty rates that have been put in place will stretch through 2015.

The upshot is that Internet radio services like Pandora now have to pay a little more than before -- 25 percent of their total U.S. revenue or a per-song-played fee, whichever turns out to be higher -- but not so much more that the company will be driven out of business.

Still, they're higher than broadcast radio has to pay, and the extra cost to Pandora, et al., has to eventually be passed on to the listener, and that's where you come in.

The big news: Pandora, the biggest of the Internet radio concerns, is ending unlimited, free listening of its service. Specifically, free account users will now be limited to 40 hours per month of free radio -- a move that Pandora says will only affect 10 percent of its audience. Want to go over 40 hours? It'll cost you 99 cents to get unlimited listening for the rest of that month, then you start over on the 1st with 40 fresh hours. Alternately, users can upgrade to unrestricted listening without advertisements any time via the Pandora One offering, which runs $36 a year.

Pandora CEO Tim Westergren refers to the extra cost as "asking our heaviest users to put a dollar... in the tip jar."

And it really sounds fair and quite reasonable, and very few users are complaining, but the precedent set is a bit ominous. With a few exceptions, like satellite radio, the world of radio has long resisted being turned into a paid service. And while the fees are admittedly tiny now, is this just step one in what will become a long line of price hikes, a death to the industry by a thousand cuts?

The music industry has to be thrilled about the move. Get people to pay a buck a month for music today and they'll likely agree to pay two down the road. Don't believe me? It worked for iTunes. I never see songs I actually want for less than $1.29 any more.

How much are you willing to pay to listen to Internet radio?