Thursday, June 11, 2009

Pandora makes a buck

http://www.wired.com/epicenter/2009/05/pandora-predicts-first-ever-profit-next-year/

As you can tell, I'm a fan of anecdotes. I like sharing with my 1 follower (thanks Lori) some little memories of my childhood so that you can how this subject matter has affected me and how, today, I can look upon it's growth as a business in relation to the growth of our culture and with myself as a part of that culture. So here's a bit about internet radio.
Pandora.com: We know it. We love it. It helps gets us through the work day and on to new music that we may or may not have dicovered otherwise. Some great artists that I have found using this application include, but are not limited to: Jenny Owens, Amie Miriello, Laura Marling, Gabe Dixon, Barcelona, Dragonette, Priscilla Ahn, and much more. When I first discovered Pandora, it was from a friend many moons ago. I would log in and listen at my parents house while working on homework or randomly searching the net for something, ANYTHING, worth-while. These were the days before Myspace and Facebook had taken over our precious internet minutes. My first internet radio station that I created was that of Alison Krauss, which is ironic considering my current employment, but I began to notice that there really isn't a lot of stuff out there that is quite like her. So I moved on to some other favorites: Susan Tedeschi, Billy Holiday, Better Than Ezra, Erykah Badu. The options seemed positively endless. Now this is just my first experience, I'm sure others have had equally mind-blowing visits to what became the first and most influential online radio site. As years have gone by, Pandora has been followed by others, a couple of examples being Last.FM and Slacker Radio. TasteKid is also and outlet, but it doesn't play the music, it just tells you who you should check out, thus causing a major loss in points.
Now I know that I'm not the most intelligent music business professional to walk the halls, but I do know that companies need money in order to survive. Pretty straight forward business model. Now, how to get that money is where the challenges have become more and more everyday... it seems. So when I first became a true Pandora advocate, I looked at the site and said "where's the money?" "Show me the money!" right?! as Cuba shouted violently in his studio kitchen into an obsolete cordless phone. I attributed it to advertising, where at the time I really started questioning this site I was also in gritting my teeth through an entrepreneurship class with one of the most eccentric musicians/professors this side of the Mississippi, and just about everything seemed to come back to advertising. It looked to be for a time there, the beginning and the end for most business ventures. But, in taking another look at Pandora, there really isn't a lot of advertising. Maybe one ad that changes as the page refreshes. The design has stayed consistent through the years, simple and straight forward through the years. Granted, as technology has changed, they've kept up, adding mobile applications, videos and even a link to festivals. But it is the iPhone application, among other things, that will give Pandora their first profit ever since their birth almost a decade ago.
Something seemingly unrelated that I saw on the glorious television screen just yesterday was a live performance of the All American Rejects at one of those crazy MTV Spring Break thing-a-ma-jigs. I was watching MTV2 and I couldn't believe the massive crowd of half naked twenty - somethings just swaying and jerking about completely without rhythm. And I thought about the bands that I'm huge fans of, and how they most certainly do not have crowds like that at their performances. Perhaps that's one of the reasons that I like them so much. So what did the All American Rejects do differently then someone like Sam Roberts Band or Gabe Dixon. Is it the lewd behaviour? or the crazy pirate outfits? I'm not sure. Maybe it's just targeting a totally different audience. So I wonder when I look at this crowd is... how many of these people have actually seen the album artwork, or did their girlfriend burn them a copy and tuck in a cutsie unmarked cd sleeve. Or they illegally downloaded it and lost on the hi-res album artwork.
so let's link this to Pandora and how they're about to make their first dollar. They're doing it.
I'm serious. That's the whole point. The labels are drowning in their own tears, so disgusted with teenagers across the country that they can't even bring themselves to work to find some avenue of expoitation. They've basically thrown up their hands it feels like. But not Pandora. They look at that swaying field of tanned greasy bodies and see leafy green dollar bills (perhaps). They were surviving better than the labels were before they even started making any profit at all. Now granted, two different business, two different business models. But they're still entertainment suppliers and they're still business all the same. The money needs to come in as well as go out. But then again, what kind of overhead does Pandora really have to pay, besides maybe some liscensing fees and the cost of running the server, and maybe an IT to maintain the site. They looked at the twenty somethings and said "let's work together" and thus from running a profit-free site they've blossomed into an iPhone application. The application is available for a measley $36 a year, but for a company that has not taken in $1 of profit in the past, that can add up to be quite the sum. It's the prefect answer to a daunting question. What do we do now? we work together. We seize opportunity and we gain success. At least we hope. Now the labels are in a completely different position. How does one create a WEA app. you don't. And any other idea that I've thought of in the last 2 minutes have an answer. An app to follow your favorite musicians? - Twitter. An App to listen to their music for free? - Myspace. An App to look at their photos and comment? - Facebook. It's all there, so where is the opportunity to begin with, better yet being able to seize it. There are other avenues that have been previously discussed. The joint advertising ventures, the merchandising ventures, so on and so forth. But it seems like none of these previously mentioned ideas or feasible, or fair. Or is it just that the labels are too scared. There is something out there and if I didn't have to get going to my second job instead of sitting here at the first one thinging about cool and awesome new ways that a label could make money but won't, I would think of it. But for now, I'll leave it open for tomorrow.