Today on ArsTechnica, there was a story about Pandora and how they can’t make any money. The Cliff’s Notes version to get everyone up to speed is this. Pandora is a revolutionary online radio program that uses the music genome project to take user preferences based on a few songs and program a customized radio station just for you. If you like your death metal technical, and swedish like Meshuggah, Pandora will play some Meshuggah. And then they will find other bands that sound similar like Lamb of God, or At the Gates or some other Scandinavian death metal.
It is brilliant. It is the future of radio. It has no business model yet.
SoundExchange is all but guaranteeing that the business model is going to fail. They are the royalty-collecting wing of the RIAA. They are in the process of imposing a fee of 2.91 cents per hour per listener for the right to broadcast music. It doesn’t sound like a lot, but it is. Satellite radio has a rate of about 1.61 cents per hour per listener. The reasoning for making Pandora’s rate so much higher is basically because their service is so cool. SoundExchange treats Pandora differently because it creates something of a 1 to 1 relationship with each member of its audience whereas SiriusXM has a single playlist for a station that maybe thousands of people listen to at the same time.
I wrote about the satellite radio merger the other day and mentioned that the whole satellite delivery method of radio was eventually going to become obsolete with the proliferation of mobile internet. I still believe that, but here’s the thing. The proliferation of mobile internet is far from upon us.
So in the left hand, we have a brilliant company that can’t seem to make money and faces the eventual shuttering of its doors. On the right hand we have a company that looks to be healthy in the short term as time starts to run out on its proprietary music delivery method. Somewhere in the middle, these two companies need to meet.
SiriusXM is only going to survive in the long run with a mix of content and technology. The first portion of that is to have original, exclusive content. Their exclusive deals with sports leagues like MLB and the NFL are a great way to start. Having Howard Stern, Opie and Anthony, and Ron and Fez is also a part of the equation. So where does the music fit in?
In the age of iPods you aren’t going to compete with an all-encompassing programmed radio station. So imagine if there were no music channels on SiriusXM. No adult contemporary channels. No hardcore punk channels. No hip-hop channels. Instead it was Pandora. Every listener has a few artists or styles and as they ride around in their cars listening to the music and giving minimal feedback, they are creating individualized music stations that will grow and change with them wherever they go.
It would be a big win for SiriusXM. It would be a big win for fans of music to not lose Pandora. Pandora needs subscribers. SiriusXM has subscribers and needs to make sure they futureproof themselves past the whole satellite delivery method. Pandora is a good way to do that.
