The impact for radio? Is the big P Doomed?

[TheBigA]

Pandora may not make it, but the category of Internet-distributed radio is not likely going away.

I agree, and that's why the record labels don't care about Pandora. They just want their money.

Record labels are changing their business model, away from hard goods (CDs, distributed through brick & mortar stores) to a business built around royalties from copyrights. It's a much cleaner business, far less inventory space, and it's enforced by law. They're approaching the point where money from digital royalties and downloads are replacing money lost from CD sales. That's their business for the future, and why they're not compromising on rates.

 

[landtuna]

I was thinking about this yesterday while reading a Warren Buffet speech circa 1999. He was predicting the dot com collapse and telling the audience that it was a mistake to bet on individual high tech companies even though high tech was the big thing. He pulled out a list of all the car companies that once existed. The list included 2,000 companies. But, he said, some years later only 3 were left and those were trading at lower values. And yet, cars were more popular than ever. In that environment the way to make money, he said, would have been to short horses.

I was thinking about this yesterday while reading a Warren Buffet speech circa 1999. He was predicting the dot com collapse and telling the audience that it was a mistake to bet on individual high tech companies even though high tech was the big thing. He pulled out a list of all the car companies that once existed. The list included 2,000 companies. But, he said, some years later only 3 were left and those were trading at lower values. And yet, cars were more popular than ever. In that environment the way to make money, he said, would have been to short horses.

Pandora may not make it, but the category of Internet-distributed radio is not likely going away.

The dot com collapse was a classic case of too much money following bad business schemes. It has happened many times before and will most likely happen again. Tons of money was poured into companies that were not making money - a fundamental error in investing. I noted that Pandora's stock price continues to climb even though they are still losing great sums of capital and have a business model currently that ensures they cannot be expected to make a profit.

The rise in the early 20th century of the car industry does have a relation to what happened in the tech industry a century later. A new invention was in great demand and every Tom, Dick and Harry who thought they could build cars (or computers) jumped into the fray. Some died because their products were poor, some because they were too expensive, some because they were niche and some because their company ran out of capital. The Great Depression killed off many car marques just as the Great Recession killed off a number of computer makers.

Buffet is slightly wrong that only three companies survived. Many were absorbed into larger companies (GM, Ford and Chrysler) and continued on for decades before finally succumbing to outdated design or costly production and low sales (Imperial, Plymouth, Pontiac, Olds etc.).

BTW, shorting horses might not have worked very well either as the equine population has grown significantly over the past century. Improved medical care and reduced populations of natural predators are given as the primary reasons.