I’d like to start this post in the same voice I use for my newborn at home. Pandora go bye-bye. I don’t mean to be insensitive, but watching the music industry implode is getting comical.
I saw Pandora CEO Tim Westergren (pictured above) speak at Stanford University last year and I’ve always loved their application. If I was cool enough to own an iPhone, I’m sure I’d love the Pandora iPhone app even more. Tim and his crew have been dealt what appears to be a lethal blow. The Copyright Royalty Board decided to increase the royalties paid by web radio providers from 0.0008 to 0.0019 per song, per listener. Pandora currently has 1 million listeners daily and the rate hike will raise their costs too high to operate a sustainable business.
Westergren has a few comments in the Washington Post article. He’s been a fighter over these issues in the past, but he now seems to be changing his tune (no pun intended) and is accepting defeat:
“We’re funded by venture capital,” he said. “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.”
Sound Exchange, the organization that represents performers and record companies, claims that artists [see record companies] deserve a bigger cut of internet radio profits. My perspective is different. The benefit of Pandora is not in playing the Top 40 of mainstream music. It allows users to enter mainstream bands and then Pandora powers music discovery, pointing to similar and often unknown bands that wouldn’t have otherwise been on the radio.
I’d understand this move by the Copyright Royalty Board if Pandora simply copied the FM radio model for web. Maybe if they played Radiohead all day and acquired legions of their fans as users, then Radiohead might deserve more of the profits. But Pandora serves up an infinite long tail of bands and serves as a vehicle for those artists to get attention and exposure from fans that have a predisposed interest in their sound. It’s a new model and shouldn’t be compared to FM radio, where the basket of musicians available to listeners is limited to a select few. I feel bad for Pandora, their employees and their charasmatic CEO.
I can say this with near-certainty. The performers are not demanding an increase in royalties. It must be someone else…
