Fans of Pandora, the internet music site that visited Cleveland back in February, might be in for a scare. The Cleveland Leader is reporting that Pandora says that it will shut down if royalty rates enacted in March 2007 are not altered soon,  as it now claims that it is paying over 70% of its revenue in royalties.

“We’re losing money as it is. The moment we think this problem in Washington is not going to get solved, we have to pull the plug because all we’re doing is wasting money. 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 its headed towards a solution, we’re done,” founder Tim Westergren said.

Let’s hope some kind of deal can be worked out…