The Internet Radio Problem Bigger Than Pandora

The end of an industry?

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The other day I posted an article about Pandora’s probably upcoming demise as a result of a royalty rate hike put in place by SoundExchange, which represents record labels and the artists signed to them. If popular opinion around the ‘net is any indication, the issue is a lot larger than Pandora shutting down.

An Industry in Peril

Pandora.comIt appears as though the entire Internet radio industry in in jeopardy as a result of this matter. This includes not only Pandora, but  popular sites like Slacker, Jango, and others. While inevitably hurtful to the industry anyway, SoundExchange may not have thought this decision all the way through. Dan Costa at PC Magazine writes:

Don’t forget, vast illegal file-sharing networks are still operating just a few clicks away. The RIAA’s legal Whac-A-Mole has barely slowed them down. If this unfair royalty scheme kills off legal, legitimate businesses like Pandora and the recently shut-down Muxtape, those users will simply go somewhere else. And that destination is more likely to be BitTorrent than a record store. The record industry may think it is killing off Internet radio, but it’s merely opening Pandora’s box.

Costa also noted that his father, an unlikely candidate for such technology use is even getting into Internet radio, emphasizing the type of effect the industry is actually having on consumers. Troy Wolverton at Mercury News has an interesting piece noting how well the industry is doing while its very existence is threatened.

A Solution? Not Likely.

SoundExchangeSome believe that these Internet radio sites just need to find more ways to make money so they can actually afford to pay the royalties. Costa hinted at something along the lines of selling concert tickets. Others have suggested ramping up their advertising models. Even the head of SoundExchange suggests such a tactic. According to Wired, he’s even a fan of Pandora and offered this suggestion:

Simson says Pandora and other internet radio sites need to start including audio ads — even though they could drive listeners to alternatives that pay no royalties at all — because people don’t look at the graphic ads on Pandora as things stand, and will do so even less as internet radio extends into the car. He accepts that online radio stations play better, more varied music than their over-the-air counterparts, but wants them to adopt a similar, audio ad-laced format in order to pay SoundExchange what he says it deserves.

Simson doesn’t seem to acknowledge or care that audio ads would annoy listeners and likely lead to them obtaining the music from illegal means from which SoundExchange would get nothing. Sites like Pandora have been a step forward in the battle against music piracy (perhaps a very small step, but a step nevertheless), and the people affected by the piracy the most wish to take a step back. I have to wonder how many less songs were illegally downloaded because of Internet radio.

The Internet Radio Problem Bigger Than Pandora
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  • http://www.InternetBroadcastingGroup.com Mark Lassoff

    Perhaps the real reason we see Pandora and other online radio stations suffering an early demise is not because internet radio is an unworkable platform, but because, simply, the business model is bad.  Bad business models without supporting revenue streams don’t make it in any industry. There are OTHER models for interent radio besides internet jukeboxes that do and will continue to be profitable.

    • Guest

       As a matter of fact, according to the Washington Post article that got this whole thing started, Pandora was slated to start seeing revenues outweigh costs in 2009 until the royalty rates went up.  So to say the model doesn’t work isn’t necessarily true.  Yes, maybe more ads are necessary to turn a profit, but the way I see it, the music industry’s most at fault here.

  • guest2341

    The user experience is preserved because we only play sponsored tracks that are relevant to what the user is listening to.

  • acure

    what I don’t understand is why Pandora doesn’t play exclusive non-RIAA music.  I called SoundExchange and it  was simply put….

    if you get the copyright/band permission to play the song

    if you get the record label permission to play the song

    if you get the distributors permission….your good to go…..

    basically, if you play non-RIAA music and have an agreement from the above, they can’t do anything…..

    They only represent  RIAA music…if don’t believe me…give them a call….I did

    • Chris Crum

      That’s pretty interesting.

  • rudejohn

    What companies like SoundExchange need to realize is that Pandora provides links to the artist’s albums and material on Amazon.  Three times I’ve heard something I really liked, made a station out of it, and bought an album a few days later.  The value that Pandora provides is more than just the royalties when they play the song (which is better, from the RIAA standpoint, than listening to the local broadcast radio).  These additional benefits of advertising for the bands and bringing them back into paying for music is another large step forward in their battle against piracy.

    • Chris Crum

      That’s a good point too – another reason why this seems to be a step backward.

  • Guest

    Here is the deal. Pandora is paying like $0.0008 per song per user. So the RIAA wants the royalties to be ~.0021 per song. Close to 1.5x the current cost. Pandora makes 15,000,000/year and pay about 8,000,000 in royalties. so when the new royalty goes in it goes to paying about 19,000,000 per yer about 4,000,00 defecet. I know I sure don’t have that laying around. And these dudes have over a million users A DAY. Long story short, do it like satelite, take a %age.

    • acure

      this is extortion….thank god I have my congessmen’s ear on this subject….oh btw…Biden will be the worse thing for internet radio…we are trully sunk if he is obama’s veep…..


      what I can’t understand…why the RIAA has resisted such great technology….they could come up with a tech that would really pay off for everyone…but greed steps in…..if you notice more and more artist are going anti-RIAA…..which they are asking for more money from the feds….800 mil to be exact…that’s our money….any RIAA free here…..



      I have nothing to do with this site…but you should know

  • http://www.surflounge.com Crazy Joe

    the big reason for searching the internet for music is "good tunes with no ads". Reminds me of the old days when FM radio played whole albums commercial free, then became worse than AM radio because it was such a good thing. Streaming web radio with commercials? NO WAY! Why not just go back to listening to offline radio then?

    • Guest

      Standard radio has a much lower variety of music–there’s only one jazz station where I live, and what is played totally depends on who is at the controls

  • Guest

     As a new 3G iphone user, and recent convert to Pandora, I hope there is a solution, BTW I have 37GB of itunes music that reflects a ton of $ I spent on cassettes and CD’s that I put on my itunes so I could listen easier, I do agree that Pandora could be charging more, free doesn’t help their bottom line, and I still pay $12+ a month for XM, but my iphone+Pandora is cutting into my xm listening time,

    John in Tucson

  • one More mile

      I have used pandora over the last few years as a radio when I travel but more importantly to figure out who I like. If I like artist "A" and want to know who sounds similar to him Pandora Is the place I go. There are allot of us out here that have money but lack a music knowledge. Using sites similar to Pandora is a much more pleasant way to get musically educated. It is more like an advertising venue then entertainment venue. Perhaps places that directly sell music with links, should have a lower royalties.

    Voice advertisements is the number one reason Why I rarely listen to radio any more. Some man screaming at me about a car sale just ruins what feeling the music artist just conveyed to me.

    One more mile

  • Ralph S
    Internet Radio
     I guess what I think of internet radio is unnecessary because every one has a right to try a new enterprise even if it to me is another waste of money. The idea is good but user fees are ridiculous because we have hundreds of stations on radio that are free. They should as well as all media services be free whether it is Internet TV, Radio, or any other form of media service. Advertising is where all these forms of services should generate their profit. It’s like paying for the air we breathe because once you make a service even if it costs millions to produce you can still make lots of money in advertising products and services. If I create an aerial that will pick up a TV station or two what right does anyone have to say I’m stealing it. The frequency doesn’t matter so why do we pay for air. Mostly, it is because we are too ignorant not too. We just don’t realize what we’ve done to a free enterprise that now make a handful of people billionaires for a lot of times something that doesn’t even belong to them for instance local TV stations that cable and satellite charges us for and won’t it be the same as radio. Won’t they also add the stations already out there as part of their list. The same with internet we pay for the use of a server but for what reason we are already on line with high speed anyway. Why do we still pay server fees as well as High speed, Long distance etc.? There should be one fee and that is high Speed internet. No local Telephone, no Internet server fee, no long distance, No tax, because when we pay them tax for services we are just in effect paying their income tax as well.    


  • Guest

    We listen to Pandora all the time but we want to own the music because we don’t carry our computer everywhere we go.  We write down the artists that we like that Pandora plays and purchase the music for our CD players and Ipods.

    How crazy it is that they think getting rid of Pandora and the like will increase their profits.  I hope Pandora considers charging a small fee before going off the air.

    I haven’t listened to the Radio in 14 years because I can’t stand the ads and them playing the same music all day long.  With Pandora I can mix up styles of music I like and never get bored.  The possiblitites are endless with them.

  • Guest

    Gee, what a shame if we were to lose internet radio! If the Government can shovel millions of dollars into the furnace known as PBS and PBR, why can’t they instead invest that money into stations like Pandora? The only time PBS has anything on worth noting is during their "begathons." And that is just the same self promoting stuff they had on their last  "begathon." And PBR is a forum for the extreme liberals.

  • http://car2be.com/ Oldsmobile

    Pandora was slated to start seeing revenues outweigh costs in 2009 until the royalty rates went up. So to say the model doesn’t work isn’t necessarily true. Yes, maybe more ads are necessary to turn a profit, but the way I see it, the music industry’s most at fault here.

  • http://www.bestradiocommercial.somc Tony

    As someone who works in the radio industry, these sites certinaly offer positives. However they are no the end all be all to the radio commercials industry. They are simply another venu for marketing. Just as we used to only have Radio, TV, Print. We now have 100+ sub venues for marketing, this is simply one of them.

  • http://www.radioactivemedia.net/ radioactivemedia143

    Internet radio advertising has growing user base both broadcasters and listeners. Lots of people Broadcasting their massage to their audience. You have never seen the day light in traditional with media outlet. Each and every audience are very eagerly for good content pertinent to their interests on the low cost of software and the profusion of social networks like YouTube, Blogtalk Radio and Ustream there are more and more free internet radio stations hitting the airwaves all the time.

    internet radio advertising

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