Pandora, the online music streaming service, is close to shutting down after founder Tim Westergren admitted the company has run into more trouble over music royalties.

In an interview with the Washington Post, Westergren said: "We're approaching a pull-the-plug kind of decision. This is like a last stand for webcasting."

The problem that Westergren's Music Genome Project is facing is that 70 per cent of his company's revenue (estimated to be $25 million) will be paid out in royalty fees, a figure so high that it could spell the end for Pandora.

This is because the Copyright Royalty Board is demanding, as of 2010, almost 20 per cent more revenue for each song played on Pandora, and services like it. This is double what it currently demands.

Unworkable licence rates

It was at the beginning of the year that Pandora stopped broadcasting in the UK due to music royalty demands instead of signing, what Westergren called "unworkable license rates".

This closure of the UK arm also marked the closure of all non-US versions of the music-streaming site.

There is some hope, though, and it comes in the form of Republican Howard L Berman from California.

Berman is trying to broker a deal between SoundExchange, the company that looks after US artists and record companies, and music-streaming services.

This is a last ditch effort, however, with Westergren saying that if a deal doesn't go through, then it could well be the end for his service. "We're funded by venture capital. They're not going to chase a company whose business model has been broken. So if it doesn't feel like it's headed towards a solution, we're done."