I think it's a well-written article that is very realistic about the problems facing Pandora. I spend a lot of my time with people on the recording business side, people who are either at labels or publishing companies. I've seen Tim Westergren speak to these folks, and tell them how much of his company's money goes to royalties, and he gets a standing ovation. The industry loves him. And at the same time, they're killing him. They can't see how their royalties are destroying him. One label head said, "Your business model is not our problem." That's not good.
Pandora's competition negotiates directly with the labels. They get a better rate. Tim is a former musician, and he doesn't want to cheat labels or artists. But his devotion to the music will ultimately hurt his company, because they don't care. The labels don't want anyone else to profit from their music but them. Internet radio should have destroyed on-air. But it can't because it's handicapped by the very companies that benefit most from it's success. Everyone in radio can learn a lot by watching what's going on here.
But you ask a great question: What's the impact for radio? The key is negotiating for a better royalty rate. What CC is doing is leveraging their on-air revenues to get a better digital streaming rate. That's critical to OTA radio. The future is digital, and a deal needs to be made now, while OTA is still vital, that will benefit digital down the road. CC's IHeartRadio has become a formidable competitor for Pandora. There will be more. But it makes no sense to music industry will willingly give OTA a better deal than Pandora. But if they kill off what should have been a successful company, it will definitely hurt them in the eyes of Congress, who is still considering imposing a similar royalty on OTA radio.
