Labels kill distribution

Pandora can't make money, may pull the plug

Here's another story about the music labels and publishers pricing a popular service out of business. Pandora is the most loved personalized radio service on the internet (in the US anyway - the British publisher association blocked them from the UK market some time ago). Due to increases in compulsory radio rates, and differences in prices between terrestrial, satellite and internet rates, Pandora can no longer survive paying 70% of their gross margin for content.

The article attempts to lay some of blame on Pandora for extending onto devices without support for their current method of monetizing stations. But it's not for a lack of trying creative solutions. Pandora has tried various ways to monetize their service, including subscriptions paid by the listeners (failed even with free trials), a la carte song upsell via Amazon Associates (that pays only 10% of any MP3 purchase back to the referring site), advertising (their current model), and others. All of which don't work given the too-high cost of the content.

So rather thanfinding a way to make the most popular music discovery service work for all parties, content owners will force Pandora's shutdown over lack of net income.

Investors will only buy music for others for so long. The labels today are betting the farm on "stupid VC" advances that will never be recouped. That's no long term music strategy - offering yet more proof for this blog's thesis that the labels will put themselves out of business and the industry will be reborn without them.