Personalized radio service Pandora has reached a major milestone: last week it recorded its 10 billionth thumb (and it was a thumbs up).
After the well documented decline of profitability in the music industry, it seems as though, with the help of streaming radio services like Pandora, the industry can again begin to garner profits from music sales. Between 1998 and 2006, record sales dropped more than 25%, from $38.6 billion to $27.5 billion, respectively. This led to an industry-wide paradigm shift in the importance of live performances and concerts. New music was released to promote new tours, whereas the "old way" would be for artists to go on tour to promote new music.
Now, Pandora's emergence as a legitimate streaming radio provider has brought more "balance" back to the revenue streams for the industry. Early in 2003, as the figure from an IFPI Report shows below, the presence of digital music services had a negligible impact on industry revenues and profitability as a whole.
Fast forward to 2009, however, and the digital distribution channel now generates $4.2 billion, or 27%, of total industry revenues, and it's about to get a whole lot sweeter. A legislative agreement reached in 2009 between streaming radio providers and royalty company SoundExchange stipulates that the music industry will, by 2015, receive royalties at a rate of $0.015 per stream, up from a clip of $0.008 per stream.
Nevertheless, a word of caution should be levied to the music industry. What we are seeing for the music industry is an incredible rise of a new digital distribution channel for its content. The simultaneous rise of a la carte music stores, like iTunes, and subscription-based radio services like Pandora demonstrate that music can be monetized on the internet.
Interest in new artists and in new music has been higher than ever, but the industry has still to figure out a way how to translate this interest into its own profitability. Though the realm of digital music has exploded into a legitimate channel, the total music market has shrunk by 30% between 2004-2009. Clearly, there is still work to be done. One way NOT to do it, however, is to squeeze one avenue of its new distribution channel. Despite its success, Pandora failed to turn a profit in 2010 and is filing for an IPO on the basis of future profitability. As negotiated royalty rates per stream increases in the years to come, the music industry is effectively extinguishing a proven successful distribution channel for new content in exchange for short-term gains on existing content.
Upon receiving its 10 billionth thumb-up, it is nevertheless time to celebrate the success of Pandora. In the eleven years since its founding, the company has developed a user base of 48 million that listens to a library of 800,000 tracks, which now accumulates $91 million in revenues for the firm. Its success has also brought rise to other entrants into the streaming radio market, such as Last.fm and Spotify, which themselves have developed into formidable subscription-based players in the market. And for that, the music industry should now also have reason to celebrate.. though it seems like they don't know it quite yet.
Article
http://techcrunch.com/2011/05/02/pandora-is-now-10-billion-thumbs-strong/
After the well documented decline of profitability in the music industry, it seems as though, with the help of streaming radio services like Pandora, the industry can again begin to garner profits from music sales. Between 1998 and 2006, record sales dropped more than 25%, from $38.6 billion to $27.5 billion, respectively. This led to an industry-wide paradigm shift in the importance of live performances and concerts. New music was released to promote new tours, whereas the "old way" would be for artists to go on tour to promote new music.
Now, Pandora's emergence as a legitimate streaming radio provider has brought more "balance" back to the revenue streams for the industry. Early in 2003, as the figure from an IFPI Report shows below, the presence of digital music services had a negligible impact on industry revenues and profitability as a whole.
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| It's Getting Harder to Ignore the Importance of Digital for Musical Content Distribution |
Interest in new artists and in new music has been higher than ever, but the industry has still to figure out a way how to translate this interest into its own profitability. Though the realm of digital music has exploded into a legitimate channel, the total music market has shrunk by 30% between 2004-2009. Clearly, there is still work to be done. One way NOT to do it, however, is to squeeze one avenue of its new distribution channel. Despite its success, Pandora failed to turn a profit in 2010 and is filing for an IPO on the basis of future profitability. As negotiated royalty rates per stream increases in the years to come, the music industry is effectively extinguishing a proven successful distribution channel for new content in exchange for short-term gains on existing content.Upon receiving its 10 billionth thumb-up, it is nevertheless time to celebrate the success of Pandora. In the eleven years since its founding, the company has developed a user base of 48 million that listens to a library of 800,000 tracks, which now accumulates $91 million in revenues for the firm. Its success has also brought rise to other entrants into the streaming radio market, such as Last.fm and Spotify, which themselves have developed into formidable subscription-based players in the market. And for that, the music industry should now also have reason to celebrate.. though it seems like they don't know it quite yet.
Article
http://techcrunch.com/2011/05/02/pandora-is-now-10-billion-thumbs-strong/
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