Don't get me wrong, I'm fond of Pandora's service, but isn't it strange that our society loves to throw money at sinking ships.
Pandora has now been funded over $55MM and cannot possibly be profitable if it boasts 70% of it's revenue goes to royalties.
Personally I'd also argue that these guys are hardly revolutionary. They have not developed any different business model from radio, but still gripe about lowering royalties. I'm not saying there's an obvious new way to distribute music, but historically a company should succeed because of innovative technology or an innovative business model, and their song attributes rated by-hand by "music professionals" should not be considered innovative technology.
But like I said, I'm fond of the service. They're pervasive and I'm personally a daily user.
I completely disagree with you about them being revolutionary, but that's besides the point. If we assume that their business model is no different than any other radio station, then why should they be charged 10 times as much (70% vs. 7% of revenue being paid in royalties, as cited in a comment above)? Given that information, they are a radio station with millions and millions of listeners. Musicians and labels ought to be fighting to get on Pandora. The likelihood of you becoming interested in an artist and purchasing a record, merchandise, or concert tickets is magnitudes higher than traditional radio, and much more accessible, since you are already on your computer.
The fact that Pandora is struggling to "survive" is fucked and is a sad consequence of obsolete legislation that is inevitably subject to change. It doesn't take a genius to see that the old style of radio is dying and that newer, more relevant services are on their way in. Pandora is currently the leader in this market. Would I invest in them? Hell yes.
Read "Remix" by Larry Lessig for more insight into the legislation behind modern media: http://remix.lessig.org/
70% was under the old deal and they admit they weren't profitable under that. The new deal is 25% of revenue or a song fee that increases each year (as you'd have seen if you'd read the article's 4th paragraph)
As for revolutionary, I don't care. It's a good service. I show it to normal, non-tech people and they almost universally start using it themselves. That says it all for me.
> I show it to normal, non-tech people and they almost universally start using it themselves.
I have to quote this. The non-revolutionary stuff that nobody has for some reason yet created is just as worthwhile as using the most newfangled tech for some crazy application. Hell, I think I know more Pandora users than Twitter users...
Everyone's thought of radio. Although, no one thought to brute force categorization. I'm a daily user today, I fully expect to look back on pandora in 4 years as an epic failure.
In Pandora's case it's almost certainly a fee per song, as it is the larger of those two values. Micahel Robertson (mp3.com) has a good write up of this http://michaelrobertson.com/ (i can't find permalinks on his site, wtf?)
I agree it's a great service. I use it frequently and have discovered lots of good music there. I'm still not optimistic it will be around long term, although $35 million should keep it around for a while. I wonder how close to profitability they are -- my guess is not very.
The "new deal" meaning that historically it's been 70%. Base projections on past data. "They are going to be profitable" sounds great, but isn't great until it happens. (And spare everyone the attitude please.)
The reason I bring up "revolutionary", is because without something that sticks, the investments are going towards a fad.
Before it was made illegal, music companies used to pay Radio Stations in order to get their music on the air!
When Pandora/etc argue that it adds popularity to music, they aren't lying- You can see this effect in the national music sales numbers-
Music used to be primarily local- A DJ in a regional market would start playing songs, and they'd catch on in that area. You can track songs such as Louie Louie, which started on the west coast and moved east.
Terrestrial radio stations in the States don't have to pay performance fees in the United States - essentially, a fee to the record label that owns the recording of a song. Say, Whitney Houston's version of _I Will Always Love You_. In all other countries, they do. U.S. radio still has to pay a "mechanical" fee to the songwriter - in this case, Dolly Parton, who originally wrote the song. (ASCAP or BMI probably handles this on Dolly's behalf, as they do for the vast majority of songwriters.)
The fact that U.S. radio doesn't have to pay performance fees is an accident of history. There is a bill in Congress that would make terrestrial radio pay performance fees. (Satellite radio has to pay, so it's not really a "we hate the internet" thing.) In Chicago, there's a radio PSA every half hour asking listeners to call their Congressperson to express their concern against it.
Pandora has now been funded over $55MM and cannot possibly be profitable if it boasts 70% of it's revenue goes to royalties.
Personally I'd also argue that these guys are hardly revolutionary. They have not developed any different business model from radio, but still gripe about lowering royalties. I'm not saying there's an obvious new way to distribute music, but historically a company should succeed because of innovative technology or an innovative business model, and their song attributes rated by-hand by "music professionals" should not be considered innovative technology.
But like I said, I'm fond of the service. They're pervasive and I'm personally a daily user.