Music royalty rate hikes for web radio may soon force leading webcaster Pandora to close up shop for good, the company's founder told The Washington Post.

"We're approaching a pull-the-plug kind of decision," Tim Westergren, who founded Pandora, said in an interview with the paper. "This is like a last stand for webcasting."

According to Westergren, the problem comes down to the major record labels, which last year pushed through an increase in internet royalties for streaming music. That fee hike means that as much as 70 percent of Pandora's $25 million ad revenue will go to the record labels, Westergren said.

But not everyone agrees that Pandora is doomed. A CNET report expressed some doubt that the situation was as dire as Westergren makes it out to be. 

Pandora, which is still largely financed from venture capital, has made strides to bring in premium advertisers, using banner ads that lead to immersive branded music experiences. But Pandora's future may also be boosted by the arrival of the iPhone, which many see as the first viable mobile handset for surfing the web. Apple boss Steve Jobs recently predicted that the iPhone application market could reach $1 billion, and many believe the company could soon have 10 million phones in users' hands around the globe. If Pandora can hang on to see the rise of the iPhone, many believe that its web-based streaming music model will win the hearts of users on the go.