The music industry is stupid

The title of this post is not inherently true, but the evidence keeps mounting.

Many people don't have to listen to music on the radio anymore, and most that don't have to will actively avoid it. Talk radio, satellite radio, ipods that hold lifetimes worth of ripped music, and now streaming radio over mobile phones are all dominating the music listening scene that was once the sole territory of over the air broadcast radio and purchased cassettes/CDs.

For years now, musicians and fans alike have lamented the collapse of good music in the musical mainstream. Artists that don't focus group well are not signed, and consequently lots and lots of good music goes underrepresented and unpromoted in the national consciousness.

Further, the labels do a horrible job of promoting their back catalogue, since so much money is spent promoting the next annointed artist. They sit on mountains of musical gold, and falsely assume that the people that would like it both already know about it and have already purchased it.

Enter Pandora.



The Pandora project is one of the most comprehensive, well-executed, and well-implemented musical and social cataloguing and streaming programs created to date. It has become one of the most widely utilized forms of streaming internet radio, and is consistently one of the top applications in the iphone app store. It allows users to custom-taylor music according to their own tastes, while at the same time introducing viable new music from legitimate artists in the same vein. It allows for instant user feedback as to whether you like the song you're listening to or not, one-click purchasing from the itunes music store, provides cover art and musical history of the artist and the specific album, and has addressed the loudness wars by proactively setting levels for each individual song as it is encoded for streaming. It delivers via a simple and good looking interface both on the computer and on mobile devices.

The quality of content is through the roof.

Oh and it makes money hand-over-fist for the record labels, paying out a projected $17.5 million in royalty fees this year alone, according to a recent Washingto Post article.


And the labels are killing it.

Pandora is venture capital funded, and won't become profitable until next year. It pays royalties on a per song/listener basis through SoundExchange, which sets its rates based on a federally mandated system - which doubled prices this year as a result of lobbying by the record lables.

That's why the labels are stupid. They have spent millions lobbying congress for a system that pits the companies that are the most successful at selling thier music against those companies own success. Because it pays per play, the more popular Pandora becomes the less financially viable it becomes - and the venture capital money is about to pull the plug.

Pandora's music database alone should be worth millions to the industry, and it's done the heavy lifting on it's own dime. Its software and intuitive user interface that allows for instant purchasing should be worth even more, and yet it teeters on the verge of bankruptcy because of short-sighted and selfish stances taken by the labels that need to get back into the business of developing and selling music.

Worse, this is a problem that congress has to solve. Well, it doesn't have to - the labels could come to an agreement on the side with Pandora the way that they did with Apple when the itunes store launched - but they're very unlikely to do so. The labels consistently over-value the music recordings and undervalue the distribution and song-selection mechanisms, and this is unlikely to change.

You can shear a sheep as many times as you want. You can only skin it once.