While the board usually sets rates for five years at a time, it deviated from that pattern and said it would again adjust the rates for 2017-2020 "to reflect the increases or decreases, if any, in the general price level, as measured by the Consumer Price Index," and subject to the judges' determination.
Pandora shares initially plummeted on the news, falling as much as 20 percent from its Wednesday close of $13.44. But the stock soon recovered and was up nearly 20 percent, topping $16 per share. In a statement reacting to the decision, Pandora did not complain about the increase.
“This is a balanced rate that we can work with and grow from," said Brian McAndrews, chief executive officer of Pandora. "This decision provides much-needed certainty for both Pandora and the music industry."
That said, Pandora will have to devote more of its resources to paying royalty fees — something that artists may like, but isn't necessarily good for the streaming service's bottom line.
Pandora's radio-like business, which is known as a "non-interactive" model, is the only kind being addressed by the Wednesday ruling.
The radio model has advantages as well. For instance, companies using the approach have a general right to any broadcast music released in the United States, while Spotify has to negotiate with publishing companies for songs. That's why artists can opt not to have their music stream on services such as Spotify, but not Pandora.
The consequences for consumers from Wednesday's ruling is murky. Pandora already had trouble turning a profit — even with nearly 80 million active users logging more than 5 billion listening hours in its most recent quarter. Pandora offers a subscription option, but fewer than 5 percent of its users opt to pay for that service.
If Pandora finds its business model in even more dire straits, chances are that it will have to adjust its operations accordingly. And that might mean a push to get more money from its customers.
The copyright board also issued new rates for paying streams, such as Pandora’s subscription service. It lowered those rates to 22 cents per 100 plays — a decrease from the 25 cents that companies had been paying. That, too, could prompt Pandora to concentrate its efforts on getting more paying subscribers, analysts said.