Silicon Valley tech gurus love to tell musicians that they “need new business models.” This is kind of funny when you consider that most of these folks work for companies that have never shown a profit. Never! Whereas my web-enabled businesses Cracker and Camper Van Beethoven (like many bands) have been profitable for decades. So can someone please tell mewhy we’re supposed to listen to these serial failures with their snake oil schemes?
I think it’s high time that artists turn the tables. We should tell these folks how to run their businesses for a change. Quit whining and bootstrap it! Just like we had to when we were starting our bands. Sell T-shirts or something!
For instance here’s how Pandora can increase their revenue 50%:
1. Pandora plays one minute of commercials per hour. Satellite radio plays about thirteen minutes an hour. Pandora could easily double the number of ads and still have a very pleasant consumer experience.
2. Pandora made approximately $86 million from advertising on total revenues of $101 million last quarter. Let’s say they double the amount of advertising and they only generate another 65 million from doubling ads. This gives them a minimum of $151 million in revenue. And that is an increase of 50%.
But seriously folks, have investors considered that the so-called Internet Radio Fairness act could take years to pass? And then once it passes it requires the President to appoint new judges that would have to be approved by the Senate. Does that sound like a quick fix to you folks? But that’s not all . These new judges would then have to convene new hearings on the royalty rates under the new below fair market value standards. This would take years.
On the other hand Pandora could start increasing revenue tomorrow by simply airing more ads. This is what most main street businesses do. They need more revenue? They generate more revenue. They don’t run to the federal government to force their suppliers to lower their prices! Adapt or die Pandora!
Of course we know the IRFA is about more than royalty rates. This is about agency capture. It’s about replacing current judges with judges that are more friendly to the the Tech and Broadcast industry’s agenda. It’s about not allowing artists and their representatives to speak out when mega-broadcasters propose direct licensing deals that benefit labels at the expense of artists. We artists could be prosecuted under The Sherman Act if this bill passes!
Let’s just hope that congress sees this for what it is: Crony Capitalism.
The Trichordist 
Who knew! Thanks for the new insights
There’s something bizarre about politicians and the tech lobby looking to obligate artists to subsidize a failing technology business, while concurrently undermining the overall lawful copyright protections that those musicians need to survive. It’s like they’re *trying* to destroy music. How are people not outraged by this?
I think this one gets the gold star
Cancelled my Pandora account just now. Posted my reasons on their Facebook page and shared this post. Question: Do I remember correctly from a past entry in Trichordist that Spotify (although not great) is better at paying artists? I guess I’m asking what is the best Spotify/Pandora like streaming based service (besides Sirius with addtl hardware required??) to subscribe to? I use iTunes of course, but do like the Pandora model where I am introduced to a lot of cool new music from smaller indie folks. Any thoughts? Thanks!
Ken
well, we did like pandora but we’ve obviously changed our minds. At this point we’re thinking that rhapsody, mog or even spotify. And in case we weren’t clear, spotify pays more than pandora because it’s on demand. while we feel spotify should pay a better rate, we do have some good things to say about spotify. first and foremost unlike pandora, spotify is not a compulsory license. which means if we don’t want to be on Spotify we don’t have to be. So for instance if we don’t like the rates we are getting for streaming we can opt out.
This assumes that people want to buy ads on Pandora. I don’t think the lack of ads is purely about maintaining the user experience. I think they are still trying to grow the demand for ads on Pandora. If the ad inventory was too high vs. the demand, then the price they could charge would probably have to go down, yes?
I don’t think Spotify is doing much better. The worst part of the ad-supported Spotify experience is not the fact of the ads. It’s the actual ads that they air. Unless you are listening to what the average teenager is listening to right now, the ads are an incredibly jarring experience. And most of the ads seem to be for Spotify or artists you can listen to on Spotify.
I’d be happy to listen to ads that were appropriate to the music I’ve got playing. There is a level or artistry that exists on terrestrial radio with respect to the ads that they play. This is completely missing on Spotify. Pandora is a bit better. But in either case, I think advertisers are still having a difficult time measuring what the return is when you advertise on these platforms.
In any event, all of these platforms are long-arc winner-take-all plays. There’s only going to be money in them if they can become the amazon.com of streaming radio. There’s only room for what, less than 5 players maximum doing that worldwide. It may take another decade (or maybe longer) for that to shake out. None of it is likely to be profitable in the meantime. Squeezing the musicians further, as Pandora is doing now, is simply a short term fix to try and preserve Pandora’s viability to be one of those players.
I know this article may seem completely out of context for this discussion, but I thought this was an interesting point from within it (http://www.washingtonpost.com/blogs/wonkblog/wp/2012/11/28/romney-is-wall-streets-worst-bet-since-the-bet-on-subprime/).
Chrystia Freeland say this:
” I think Obama and the economists around him have a very sophisticated understanding of both globalization and the technology revolution and the impact they’re having on the world economy and the way they’re creating these winner-take-all spirals.”
And then later, she and Ezra Klein have the following exchange:
“EK: As a general point, though, I imagine that’s somewhat scary to these guys. If the basic, positive-sum nature of economic policy is eroding, and we’re going to have fiercer political battles over who gets the spoils of growth, that’s got to be worrying. I imagine the very rich look out and think to themselves, there are more of them then there are of us. That seems to me to be the concern that’s beginning to break into the open with this talk of “gifts.”
CF: The happy way of reconciling that problem is to have an economy where the natural outcome of all of us working hard and being successful and all those good things leads to a more 1950s-style distribution. We’re more comfortable with that. Yes, the people with merit and inventiveness should be at the top, but we want the natural outcome to be harmonious. And the scary thing is, what if that’s just not how the economy will work for the next 20 or 30 years? What if even if we get education and economic policy and all the rest of it right, that we’re not there? Do you say, okay, the way it’s working now is not consistent with how we imagine this democracy should work and therefore we believe the rich should be taxed more aggressively to support the middle class? That’s a very different way of thinking about the economy and the social contract.”
There’s a very good chance that streaming music is a winner take all spiral of the sort described above. And as you are pointing out, there’s a good chance that the “middle class” of paid content creators may be a casualty of that, unless government regulation is marshaled to maintain some limits around things.
I often disagree with your rhetoric and some of your reasoning around this stuff. Perhaps someday I’ll get my shit together and try to explain why that is in print.
Notwithstanding that, I do agree with you on this: If one values the contributions that paid content creators make to our culture and our quality of life, one needs to start taking notice of the very real possibility that the current path we’re on is leading us toward the eventual extinction of many of these folks.
If we want to reverse this course, we need to a more clear-eyed and honest dialog about this reality. Then, people need to get organized to fight efforts like the one Pandora is pushing here (it definitely won’t be the last time).
The alternative is a world where most cultural product is created by unpaid folks. Personally, I’m skeptical about that being a great outcome. But at the end of the day, who knows? Maybe that sort of a world would end up being great. Or maybe the youths will figure out ways of making money being creative that are beyond the comprehension of gray haired people like me.
But at least as far is more established forms of creative production are concerned (writing, filming, music making, etc.), people need to take the possibility of the downward spiral more seriously (especially people who aspire to be paid creators).
It was always hard to win the tournament of rock. But it’s harder now than ever. In addition, the payout at the end is lower for just about everyone. Let’s just say that Powerball ain’t what it used to be.
I don’t think we disagree with your analysis. We’ve noted it before: The internet seems to want one of everything. One amazon, one iTunes, one facebook, one google. Disintermediation itself seems to be leading to enormous disparities in wealth. The disingenuous argument made by the technologists like Pandora is that lowering pay for artists will launch a 1,000 pandoras. We all know it won’t. Now that we’ve admitted that we can deal with songwriters and performers pay as if we are dealing with a public or private monopoly. This is a both a labor rights issue and an “efficiency of capital” problem. We need to find mechanisms that make sure “the invisible hand” isn’t mugged by the technologists whilst trying to reward the creators of content.
Ultimately we have to see that the technologists are really imagining a collectivist future. Or Feudal future. Depending on your view of markets. To lesser or greater degrees silicon valley wants to limit IP as property. This leaves a web economy that really only rewards the feudal lords, the owners of the networks and platforms. And to a lesser extent those who offer services. Those who create content or IP are only paid voluntarily. We need to break out of this collectivist view of property on the web, so that we can create a true market economy on the web. One that allows small stakeholders to profit and thrive.