Written by Music

Pandora and Internet Radio Services

If you’re interested in this sort of thing, then you’ll already know that Pandora is shutting down in the UK. The full email sent to Pandora users is on James’ site.
As the email explains, the service has been shut down because they were unable to come to an agreement with the music rights organisations in the UK. Essentially, they want to charge on a “per listener, per song” basis.
Unable to reach an agreement in the UK, they’re going to block the service to UK users from next week.
It’s a principled decision that seems fair and reasonable. But the people who aren’t fair and reasonable are the music collection agencies with whom they haven’t been able to deal with.
Commercial UK radio stations have to pay for the music they play on the radio; part of the money goes to the performers, and another part goes to the copyright owners/song writers. That seems a reasonable compromise. They way that they collect this cash is to simply take a fixed percentage of all the revenue that the stations earn – for larger stations it’s around 10%. That leaves enough cash over, hopefully for the station to pay its costs including staff, equipment, transmitters and so on, and still leave a profit.
If the station is commercially successful, then the artists and songwriters get more money. Stations have to send lists of the tracks they play, so the cash does go to the relevant artists. It’s a win:win situation.
But the flat rate fee doesn’t make sense. If it’s set too high, as they currently are, then the business is unsustainable. This is what Pandora has found – the advertiser revenue they’re generating is not enough to cover the costs. This is the same problem that faces all streamed radio in the US where they’re also expected to pay on a per track per listener basis.
Radio services that are “simulcast” in the UK, like Virgin Radio or Heart FM, escape these costs because their internet broadcasts are seen as simply a different broadcast band. Your service might be on FM, AM, Sky, Freeview, DAB or the internet. It doesn’t really matter because the more listeners you have, the more money you’re able to earn, and the more money artists and song writers get.
It seems to me that like the record industry, which is slowly – painfully slowly really – dragging itself kicking and screaming into the 21st century, the music rights bodies are simply behind the times.
I don’t want to give record companies too much credit because they simply don’t deserve it. But more of them are finally seeing that selling un-DRMd music is a good thing. And they’re realising that if they don’t try new things, their CD sales are only going to continue falling without any replacement revenue at all.
Strangling new models for the music industry at birth is surely a mad idea. Here’s a burgeoning company that wants to pay for the music it plays but finds itself frozen out by the industry. It’s providing a service that we know people want and enjoy. But it won’t budge.
So what happens now?
Well what if it were to set-up somewhere legislatively “difficult” – perhaps Russia where it took so long to shut down those mp3 sites. What are you going to do to stop them then?
Interestingly, while Pandora faces closedown in its home territory of the US, the Viacom Last.fm continues to broadcast. Working on a similar basis, they’ve followed a different route and signed deals with most of the four major record labels. As far as I’m aware, they’ve not done a deal with the largest of them all – Universal.
Yet is it really as simple as that? An album licenced to EMI in the UK might be on a different label in the US. So how does a global deal work? And then there are limitless independent labels, some of them having bigname bands on their labels. Radiohead’s recent physical album release has come on the XL label for example. Last.fm has done deals with a couple of them, but they’re the tip of the iceberg.
And even if you do a deal with the label, is that enough? I genuinely don’t know the answer to this, but do you still need agreement of the performers, copyright owners or song writers as well?
It seems to me that under the relative safety of a massive media organisation like Viacom, Last.fm can play a little faster and looser than Pandora is able to. Like YouTube, which let’s face it, has built its success on the back of other people’s content (must stop using that word), Last.fm is in a position where it’s waiting for people to come to it to do deals.
Who says the Wild West isn’t dead?