A while ago I wrote about the custom music service Pandora. It’s unique approach to online radio was something I raved about and I’ve been an avid user of it’s service for a while. I’ve recommended the service to friends and family, all of who also love the service.
Apparently Pandora is in a bit of trouble though. Not necessarily because of something they did or something they’ve been doing, but rather because of something they’re NOT doing. An article in the Washington Post today reveals that the royalties that Pandora has to pay for streaming their music is about to go up.
Right now, Pandora (and other web streaming companies alike) pay 8/100 of a cent per song per listener. That fee is about to go up to 19/100 of a cent per song per listener. OK, that may not seem like a lot, but when you’ve got a user base in the millions, the numbers add up quickly.
Having worked in traditional radio for many years, I have a little insight into what Pandora (and other online radio stations) are going through. We struggled to put four of our music stations on the internet when the RIAA was demanding some pretty hefty royalty rates. You see, we were just trying to stream our terrestrial programming to give out listeners another avenue to listen. That didn’t come free to the station though. There’s computers to run the streaming software plus a ton of bandwidth the listeners use up actually streaming the audio.
Oh, and then there’s the software that runs the stream. You see, we couldn’t stream our commercials online because of the royalty fees for the actors in those commercials, so we needed software that turned off the program feed when we went into a spot break. All of this cost money, and a lot of money, but we felt it was a real benefit to our listeners so we put a system together with duct tape and string and broadcast it out to the Internet.
The news about the higher fees for streaming made me think about the stations I used to work for and if they were going to feel the crunch. In fact, one of them already did. A smooth jazz station I worked for, having ditched their terrestrial signal (that’s a long story in itself) left the station up for Internet only as a service to the listeners they had before pulling the plug. However, they too have closed up shop as they could not keep up with the cost of streaming.
So what are Internet radio sites like Pandora to do? Well, find a better business model that’s the “no duh” answer, but what does that mean for “us” the Pandora listener? They’ve already got plans to start inserting segment based sponsors into their stream (such as “This segment brought to you by…”). A post over at Mashable suggests that Pandora would survive if they got more social. However, the ultimate decision will likely have to come out of the listeners’ pockets. In the form of a subscription based model.
I think they could get by with a marginal fee-based subscription. That together with advertising might be just what they need. Now, I know a lot of you “give it to me for free” people out there would be upset with a subscription based service. Hey- I love free just as much as the next guy, but if I had a choice of nothing or paying a moderate price for a service I really like then I would probably pony up the cash. The question is, would you? Because that might decide the ultimate fate of Pandora and similar services like it.
