Popular web radio site, Pandora, might be calling it quits. Tim Westergren, who founded Pandora, is reportedly facing this decision in the near future; the result of the federal panel’s ruling to double the per-song performance royalties for web radio sites, and their intent to raise this again by 2010.

Pandora’s board is working hard to avoid shutting down and short ads can be expected through user-created radio stations. These shouldn’t be too bad- according to Westergren, we will be hearing something along the lines of, “The next half hour brought to you by…”

I’ll be curious to see what bloggers have to say about this across the web- particularly since web radio sites appear to be the main focus of such drastic royalty fee increases while traditional radio pays nothing and satellite radio pays minimal royalties (6-7% of revenues.) SoundExchange (organization that represents record companies and their performers) is reportedly trying to change this, but it’s safe to say that traditional radio will survive.

So what will happen to our web radio? Pandora has an average of 40,000 new users DAILY so I wouldn’t be surprised if mainstream advertisers were implemented for airtime ads in an effort to cover royalty costs. Is this a fair trade for the privilege of user-built stations and playlists along with social networking? Personally, I’d say yes… small price to pay to avoid ever having to listen to the Spice Girls again.

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