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Pandora Acquires an FM station for Music Licensing Fight

I wonder if this will change the company's view that OTA radio should pay royalties to labels.

I've seen Tim Westergren speak several times before music industry groups, and he's always gone out of his way to say that because he's a musician, he doesn't want to sidestep any of the royalties his company might owe. When he announces how much of his company's revenues goes to royalties, he always gets a standing ovation. But since Pandora has gone public, it's clear that the company's goals are different from Tim's. They have taken several actions aimed at getting their royalty payments under control, in an attempt to finally turn a profit. They've even partnered with OTA Radio in Congress to fight for the Internet Radio Fairness Act. All of this has led to the head of one label say, "Your business model is not our problem." So for all that Pandora and other internet broadcasters have done to introduce new music to the public, it's clear that the music industry has no sympathy for the company's financial situation. The latest negotiations with Apple have shown which company has the better business model, and in the end, all the music industry really cares about is money. So who can blame Pandora for taking this move? I just feel they need to publicly change their views on the label performance royalty.
 
So the news today is that ASCAP says owning one OTA station doesn't qualify Pandora for OTA rates. And BMI filed suit against Pandora, asking a judge to set market royalty rates. So much for all the good will Tim Westergren built during the years before the compa ny went public.

By the way, this is the exact ball of wax that OTA broadcasters are setting themselves up for if they approve a label royalty if it pays more than the songwriter royalty. It's simply unfair that Pandora is paying record labels more than ten times more money than ASCAP and BMI
 
A performance royalty would put many small broadcasters out of business.

There is only so much money to go around.
 
TomT said:
A performance royalty would put many small broadcasters out of business.

There is only so much money to go around.
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The performance royalty has practically put Pandora out of business. And you can see how little the music industry cares. They will get their money from someone. If not Pandora, if not OTA radio, then from Apple or AT&T. They have content that the public wants, but doesn't want to pay for, and there'll always be someone who thinks there's profit to be made. Unfortunately the way the DMCA was written, it favors the copyright owners and not the users.
 
Pandora wants to play one commercial an hour, or something like that, so that they don't sound "cluttered" like radio.

Pandora knew the royalty rates were high, and if they simply started selling more spots an hour, that would resolve the issue,,,but they either can't sell them or refuse to have the programming "cluttered" like radio

Before the .com bubble burst, Yahoo made me change many things about how we made money from streaming radio stations,,they were more interested in "the user experience",,guess what, after a change in CEO's that went out the window, and they wanted to know how to make money with it, ads before the streams suddenly went from "forbidden" to, how many can we sell.

Pandora can't have it both ways,,if a radio station could make good money running one spot an hour,,then someone would be doing it,,but that's not hot it works, and Pandora if pandora starts to realize that, they might have a chance at staying in business,,as it stands now they are a quickly sinking ship

andy collins
 
andydallas said:
Pandora can't have it both ways,,if a radio station could make good money running one spot an hour,,then someone would be doing it,,but that's not hot it works, and Pandora if pandora starts to realize that, they might have a chance at staying in business,,as it stands now they are a quickly sinking ship
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I think that's what the record labels and PROs think too. You consider Pandora revenues are pretty low considering their user base. It's very likely the "one an hour" rule will go away soon. They're already put a time limit on streaming.
 
Pandora has explained why they can't simply increase the amount of advertising. They have a lot of unsold ad inventory on their mobile service because advertisers have been reluctant to embrace the mobile advertising industry. Facebook has proven this to be true. Pandora can't increase the amount of ads they play when they can't fill their existing ad spots. They also have a very valid concern of the possilbity that increasing the amount of ads will drive down the price of ads. Devaluing their ads at a time when they are trying to prove to advertisers that their targeted ad space on mobile devices is valuable would be counter productive. The targeted ads Pandora can supply on mobile devices is worth far more than they can charge for at this time. That's what is killing them. Pandora needs time to prove themselves and the music industry is unwilling to let them have it.
 
Casey said:
Pandora needs time to prove themselves and the music industry is unwilling to let them have it.
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That's because Apple and Google are throwing money at them, and they can't understand why Pandora is trying to go cheap. At this point, the record labels prefer the deals they're getting elsewhere, and since Pandora needs their music, they feel they're in the driver's seat. Plus the songwriters see how much Pandora is paying the labels, and feel cheated. The labels get ten times as much money as the songwriters. That's a bad deal.

Driving down the price of ads is a good thing, because then advertisers will be willing to take a chance at a lower price. Obviously their rates are too high right now, or they wouldn't have so much unsold inventory. Pandora thinks they're immune to the problems OTA radio has struggled with, and they're not.
 
Here's what Jim Cramer's financial site TheStreet.com had to say about the Pandora situation:

http://www.thestreet.com/story/11950099/1/how-internet-radio-should-handle-the-music-industry.html

Interesting how sympathetic the writer is to Pandora, while less so to Sirius and not at all to OTA radio.

The fact is that Pandora has built its business model almost completely on the backs of music. They don't create their own unique content. They don't add much to the music experience besides the music itself. So Pandora would be nothing without music. This is very different to Apple, which has built a complete experience around its hardware. Same thing with Sirius, which is much more than just a place to hear songs.

Things were fine when Pandora was the top payer to the labels. But now that Apple has made a better deal, the labels have given up on them. Pandora has two choices: Increase the amount of royalty they pay out, and go bankrupt. Or create something unique to their brand besides the now-duplicated genome project. That was unique and cutting edge ten years ago. It's becoming obsolete now. Perhaps their only solution is a merger with another more innovative organization.
 
Apple's iRadio may pay more but it also offers more. It has interactive features and doesn't pay the interactive price that Spotify/Rdio/Rhapsody pay. The indie labels are very upset with the price Apple is paying and even the majors are not happy. They simply accepted a lower rate because Apple promises to gain the same amount of listeners as Pandora while paying slightly more. And they trust Apple. But Apple has made them an unrealistic promise. There is no way they will gain that many listeners or even a decent fraction of it.

As long as Pandora retains listeners they don't need to offer anything unique. They just need to increase their revenue per 1000 listening hours. If they could increase the mobile revenue even a few dollars per 1000 hours they would probably be profitable right now. If they could triple it and get it up to the level of what they make for 1000 listening hours through the web player they would be very profitable.
 
Casey said:
As long as Pandora retains listeners they don't need to offer anything unique.
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The problem is they're a one-trick pony. When that trick was unique, everybody loved them. Now the trick has grown tired. They need to come up with something new. Apple keeps on reinventing itself. That's what Pandora needs to do IF they want to grow. Otherwise, they'll become take-over fodder for someone else.
 
Casey said:
They just need to increase their revenue per 1000 listening hours. If they could increase the mobile revenue even a few dollars per 1000 hours they would probably be profitable right now. If they could triple it and get it up to the level of what they make for 1000 listening hours through the web player they would be very profitable.
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Exactly. Pandora currently makes about two cents per listening hour from advertising on a mobile device. At five cents or so, the amount they make on desktop listening, they would be profitable -- assuming that the extra revenue wouldn't cause an increase in royalty payments (which it would).

Pandora is a 2 billion dollar company (by market cap), dozens of tech companies could buy them out, if they thought Pandora was offering something worth buying. Apparently neither Apple nor Google think so.
 
PTBoardOp94 said:
Pandora is a 2 billion dollar company (by market cap), dozens of tech companies could buy them out, if they thought Pandora was offering something worth buying. Apparently neither Apple nor Google think so.
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I agree. What does Pandora have that Apple or Google don't have? The Genome Project? That's laughable now.

Their biggest hope is that some more traditional company still believes their mythology and buys them.
 
No one else has an algorithm like the Genome Project. Pandora analyzes each individual song for that song's individual traits. Everyone else uses readily available information such as release date, genre, popularity, tracking social media, etc. The end result may be similar, but how they get those results is completely different. Most of the tests I have seen still rank Pandora as the most accurate.
 
Casey said:
Most of the tests I have seen still rank Pandora as the most accurate.
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We'll see how important that is to users after iRadio comes out. Because that seems like the only thing Pandora has.
 
Casey said:
No one else has an algorithm like the Genome Project. Pandora analyzes each individual song for that song's individual traits. Everyone else uses readily available information such as release date, genre, popularity, tracking social media, etc. The end result may be similar, but how they get those results is completely different. Most of the tests I have seen still rank Pandora as the most accurate.
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For a long time I thought that was their big advantage. I personally am a fan. Now, I question whether anyone but me and a few other loyalists care about it. On top of that, it's got to be expensive. Just what Pandora needs, another high expense.

PTBoardOp94 made a good point: Companies like Google and Apple typically try to buy market leaders when they enter a new market. They seem to never have made a play to acquire Pandora. That says a lot.
 
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