Archives

Categories

Pandora business model undermined by high royalty demands

Back in April I wrote that the royalty demands of the music majors risked undermining the viability of online music services. It seems that might be coming to pass – as reported on Techdirt, under the pressure of high royalty demands from the RIAA Pandora is thinking of shutting down.

If this comes to pass it will be a crying shame – Pandora is a great and popular service with about 1 million listeners daily, and is one of the 10 most popular applications for the iPhone and is attracting 40,000 new customers a day.

It is also stupid – the issue is a straight fight over how the proceeds of music are split between the retailer, label and artist. Nothing new there, and I would guess that Pandora are at least to some extent grandstanding by making the debate public, but the bigger issue is that in the digital world the pie is smaller than it used to be. Labels and artists therefore need to a) reset their expectations, and b) find other ways to make money.

There have been lots of initiatives by individual artists that evidence this trend – e.g. Madonna’s $120m deal with Live Nation, Prince’s deal last year to give away his new album with the Mail on Sunday here in the UK, and then recently AC/DC’s exclusive distribution deal with Walmart for their new album.

It is time the industry behemoths caught up with what their leading artists are doing.

To finish on a positive note, there are some encouraging signs around. Aecdotally I hear good things about Last.fm and We7 and their deals with labels.

  • Meaghan Fitzgerald

    I completely agree – I think we’ll have to look for some flexibility on both sides, though. Ideally, I could just listen to any song I want whenever I want to. But, for some strange reason, the people who created the music want to earn something out of how much I enjoy their work. Go figure. Well, it’ll be an interesting debate but at the moment the music industry holds most of the cards and I hope that there is a resolution that allows music fans to share and enjoy new music while the industry isn’t entirely undermined and, gosh, wouldn’t it be great if the actual artists got a piece of all of this.

  • Meaghan Fitzgerald

    I completely agree – I think we’ll have to look for some flexibility on both sides, though. Ideally, I could just listen to any song I want whenever I want to. But, for some strange reason, the people who created the music want to earn something out of how much I enjoy their work. Go figure. Well, it’ll be an interesting debate but at the moment the music industry holds most of the cards and I hope that there is a resolution that allows music fans to share and enjoy new music while the industry isn’t entirely undermined and, gosh, wouldn’t it be great if the actual artists got a piece of all of this.

  • nic

    Meaghan – artists obviously need to get paid, and I agree there has to be give and take on both sides. But I wouldn’t agree that the music industry holds all the cards at the moment – if they did then 80-90% of digital music wouldn’t be consumed illegally (or whatever the percentage is).

  • nic

    Meaghan – artists obviously need to get paid, and I agree there has to be give and take on both sides. But I wouldn’t agree that the music industry holds all the cards at the moment – if they did then 80-90% of digital music wouldn’t be consumed illegally (or whatever the percentage is).

  • Pingback: An analysis of why labels need to reduce their royalty demands | The Equity Kicker

  • Meaghan Fitzgerald

    Sorry for the misunderstanding, I meant the music industry holds the cards over the artists, not the buyers. The artists themselves have very little room to negotiate under the contracts they’ve signed and when deals are made they tend to favour the industry rather than the musicians. I actually read an interesting article this morning about a band thanking listeners for piracy as it actually meant they got more popular.

  • Meaghan Fitzgerald

    Sorry for the misunderstanding, I meant the music industry holds the cards over the artists, not the buyers. The artists themselves have very little room to negotiate under the contracts they’ve signed and when deals are made they tend to favour the industry rather than the musicians. I actually read an interesting article this morning about a band thanking listeners for piracy as it actually meant they got more popular.

  • Pingback: Creative destruction in the digital value chain | The Equity Kicker