 RAIN 6/13: Pandora IPO highlights Net radio's challenging royalty situation ·Jun 13, 10:36 AM RESEARCH FIRM NOT ALONE IN ITS CONCERN ABOUT PANDORA’S HIGH ROYALTY COSTSPandora’s IPO is bringing Internet radio’s inequitable performance royalty situation front-and-center.
In Q1 2011, Pandora’s royalty costs accounted for nearly 60% of its revenues (RAIN coverage here). This royalty challenge has some analysts worried about Pandora’s IPO. In late May a BNet columnist called the IPO a “suicide pact” thanks to the high cost of music royalties (RAIN coverage here) and now research firm BTIG has voiced the same concerns.
The fast-growth of Pandora’s user-base — and thus its royalty costs — pressures the company to simultaneously grow ad revenues just to keep up. But BTIG doesn’t think Pandora is doing a good enough job monetizing its mobile listeners, which now make up 60% of the webcaster’s audience. AdWeek has more coverage of BTIG’s analysis here. To readers of RAIN, Internet radio’s performance royalty challenges are nothing new. But with Pandora going public, the industry’s plight looks to be gaining a new audience in Wall Street. — MS FCC CRAFTS REPORT ON MEDIA’S TECH FUTUREJennifer Lane in Audio4Cast today covers on a new FCC report on the future of electronic media in the U.S., making special note of the report’s assessment of radio.
Lane summarizes the report as, “a concise look at radio’s evolution from a media that dominated as a local news source to one with more dispersed offerings and delivery technologies.” Of these new “delivery technologies,” Lane suggests the report urges broadcasters to expand their platforms. She quotes the report:
The report, titled Information Needs of Communities: The Changing Media Landscape in a Broadband Age, was produced by the FCC Future of Media task force (Lane links to the full report here, with a shortcut to the radio section here). Read Lane’s coverage in Audio4Cast here. 3 DOWN, 1 TO GO: SPOTIFY INKS WITH UMGSpotify is now one major-label deal away from launching in the U.S. AllThingsDigital reported on Friday that the Swedish-based on-demand music service had finalized a U.S. deal with Universal Music Group, the industry’s largest label group. With agreements for the U.S. with BMG and Sony already in hand, Warner Music is the company’s final hurdle to its long-awaited U.S. debut.
AllThingsDigital’s Peter Kafka writes, “Even if Warner signs next week, though, it will likely take Spotify some time to ramp up a marketing campaign and other elements it would need for a U.S. launch. I wouldn’t count on seeing anything in the States till July at the earliest.” Read more here. share: del.icio.us.  Reddit  Digg  Yahoo  Wink  Windows  Google  Newsvine 
CommentCommenting is closed for this article.  Other stories RAIN has upgraded (and moved)! RAIN 9/13: RAIN Summit Chicago takes place today! RAIN 9/12: First Summit in RAIN's hometown takes place tomorrow RAIN 9/9: Summer holidays, "doldrums" impact July Webcast Metrics, but audience up over last year RAIN 9/8: Clear Channel launches new customizable iHeartRadio beta; RAIN goes hands-on RAIN 9/7: Meet more speakers you'll hear at RAIN Summit Chicago in less than a week RAIN 9/6: Clear Channel taps The Echo Nest to take on Pandora RAIN 9/2: RAIN reviews Spotify's radio-like product Artist Radio RAIN 9/1: UK online radio aggregator Radioplayer campaigns b'dcasters to create "all radio" ratings RAIN 8/31: Execs from Merlin, Triton Digital, jacAPPS and more to appear at RAIN Summit Chicago |
Wall Street investors and analysts critical of Pandora all point to the same problem, long-known to those in the Internet radio industry: user-growth is expensive for Pandora (as it is for other webcasters). Every new listener burdens Pandora with more royalty costs at a much higher rate than AM/FM radio, which does not pay performance royalties for sound recordings.
