Pandora and Internet Radio

On August 16, 2008, the Washington Post ran the news story, “Giant of Internet Radio Nears Its ‘Last Stand’,” referring to Pandora.com.  Pandora is a standout Internet site that allows users to create custom Internet radio stations based on their favorite songs and artists.  It’s a unique way to discover undiscovered music showcasing technology that gets about a million daily listeners.  The Post quotes Pandora’s founder Tim Westergren, “We’re approaching a pull-the-plug kind of decision.  This is like a last stand for webcasting.”

The problem is one of paying royalties.  Right now there are a number of technologies that broadcast music:  traditional radio, satellite radio, cable TV radio and Internet radio.  Oddly, they each pay different rates to play music, and it looks like the music industry wants Internet radio to pay the most.  If this happens many sites will shut down.  Pandora has yet to make money but anticipated to go into the black in 2009 if the rates were not increased.

There are many articles about the death knell of Internet radio showing up now, with the implication that if the rates these sites have to pay goes up they will close their doors.  I think other things might happen.  Why give up on a new business model so quickly?  Pandora is actually a superior way to listen to random music – it’s superior because it’s less random but still random.

There are two way to listen to music.  You think of a song you want to hear and you play it, or you turn on a broadcasting system to play music for you.  The first method usually involves owning the song, but subscription music is a variation of that.  The second method, random listening, involves finding a source that’s close to your musical mood.  In the old days, a city might have a dozen radio stations and you picked one to play, or if you were in your car, you programmed your five radio buttons and jumped between them.  Satellite music offers more variety by giving you more stations to choose from.  Internet radio ups the variety factor further.

Pandora let’s you pick a seed song and then Pandora plays songs their Music Genome Project software thinks will match your taste.  You can click thumbs up or thumbs down on their picks to help the software zero in on what you like.  It works exceedingly well, but it’s still random music, or broadcast music.

Now I want musicians and music producers to get all the money they can, but I don’t want them to unfairly charge one random music technology more than another, and that appears to be a key issue with Pandora and other Internet radio sites.  Another random site I like is Playa Cofi Jukebox, which allows you to seed your mood by picking a year and it broadcasts random songs that came out in that year.  That’s another triumph of technology in my book.  I want these sites to succeed.

Pandora is thinking of ways to improve its ad revenue and that’s good, but I think they should think of other ways to generate revenue.  I pay for cable TV and a DVR so I see less television ads.  I would be willing to pay a fee to Pandora to not hear ads.  They should run ads, but allow users who want to pay not to listen to them.  Another possibility is to merge with a subscription service like Rhapsody or Napster and be an extra selling point for those companies.  Rhapsody has random radio stations for when I don’t want to pick my songs, but it would be even better if they had the Music Genome Project technology.

I have come to see great value in random music because of shuffle play of my MP3s.  I can even add Music Genome Project like tech to my own MP3 library with MusicIP software.  But Pandora beats my collection of 17,081 songs by light years.  And I can play it on my iPod touch.  I really do not want to see Pandora and other Internet radio stations go out of business.

Another option, rather than increasing royalty rates, could require Pandora to provide links to songs that take users to sites selling the song.  Sites that would also provide a commission to Pandora.  Pandora could offer a variety of online music stores and users could check box their favorite when they register.  Increased sales should offer better revenue than broadcast royalties.

Don’t get me wrong.  I’m not wanting free music.  I believe free is bad.  I want the music industry to make their money and I want Pandora to make money and I’m willing to either listen to ads or pay a subscription to get what I want.  It will be a shame if the industry that collects royalties forces these new sources of random music out of business.  I don’t listen to traditional radio anymore.  I’m not interested in satellite radio.  I have cable TV radio but I don’t use it.  I’m an Internet person.  Why should random music businesses pay more per song for customers like me than the other businesses pay for their customers?

Jim

If you read the Slashdot thread listed below one reader posts the suggestion that Internet radio should just stop using songs that require royalties.  That’s an interesting idea, but I think ultimately it’s a bad idea.  Free is not good.  If this idea succeeded it would kill off a whole industry and destroy legions of jobs.  If the writer’s purpose is to promote new artists and bands, it would be better to use Pandora and help these new musicians gain an economic footing, rather than turn the music industry into all amateurs.  The Music Genome Project would work just as well with unknown artists.

The real virtue of Pandora is when it plays a song for you that you’ve never heard but you love it so much that you buy it.

Related stories