The rumor that Pandora may be forced to close down has come back to haunt us. For those of you who still don't know Pandora is an interactive personal music streaming service. You seed it with a few artists or songs you like, and it starts playing. As the songs are played, you can either thumb them up or thumb them down.
I have been a big fan of Pandora for a long time. The thing I like most about Pandora is that it allows you to expand your musical horizons without feeling ignorant. I got to know Hendrix, blues and metal better through Pandora. Another cool thing is there is very little crud: once you log in and tell it an artist or two, just type in pandora.com and it immediately starts playing. So Pandora is great, why isn't making enough money?
Well, in order to make money you need to spend a little and make a lot. Pandora is currently haunted by the evil RIAA. It is being charged more than satellite radio stations do, and certainly more than terrestrial stations that apparently pay nothing. The way it makes money is through visual ads and through affiliate marketing (I'm guessing those links are not just for our convenience). The design of the advertisements are very smart, you hear nothing but music but if you want to give Pandora feedback, when you look at the screen the ads change, grabbing your attention. That's really smart. So what's the problem?
Apparently, with the inflated rates the RIAA, these ads are not enough to cover them. So what can they do? Either lobby their way to lower rates or make more money. How about both?
I argue that if apple buys Pandora they can achieve both. Hoping for unlimited music from Apple may be too optimistic. However, Apple's pull with the music companies can still get Pandora a good deal. Integration with the iTunes music store will sell more songs. Having Pandora pre-installed on all iPhones and iPods can get it to a greater audience. Having Pandora on iPhones will sell more iPhones. Everybody wins. But I think there's more money to be made here.
I always thought Pandora is not reaching their full potential with the visual ads. Are audio ads such a sin? Podcasts do them? Is that so wrong? In case you really want to have uniterrupted music, add an additional 1 dollar a month to your monthly bill and you get ad free Pandora goodness.
No need to thank me...well...