Richard Tallent’s occasional blog

How Pandora can be profitable

I’m a fan of streaming music services. Pandora clued me in on a number of bands I would’ve never heard of otherwise. But services like these currently have unsustainable business models. They pay exorbitant license fees for the music, and they also have to pay for bandwidth. And with the end of network neutrality around the corner, their bandwidth will likely skyrocket, putting the last nail in the coffin.

I have a solution.

As a music fan, I already own a good portion of the music that pops up on my Pandora stations. I either bought it because I was already following the band, or because I found it on Pandora and wanted to be able to play it on demand.

I suspect many Pandora users are like me. They own a lot of music, but still use Pandora because it’s better at matching their mood than iTunes, and because they like hearing something fresh occasionally.

So, here’s my solution: simply have the app catalogue my device’s music library, and any time it would normally choose to play a song I already own, play it locally rather than streaming it.

Some benefits of doing this:

  • Pandora doesn’t have to pay streaming or bandwidth fees. This could cut their overhead drastically without degrading the user experience.
  • I hear the songs I own in high quality, not compressed for streaming.
  • I can use the app even if my connection is poor or if I’m off the grid.
  • I use less bandwidth against my mobile plan cap.
  • I still get to hear music mixed in that I don’t currently own.
  • Because of all the above, I have an incentive to buy songs I really like, and Pandora could even sell them to me so they become part of my normal music library (competing directly with iTunes and Amazon). They make money, I get a better music collection.
  • The above gives Pandora strong incentive to continue to improve their prediction algorithms._

_ * When connectivity is slow, to avoid skips, Pandora could buffer a streamed track in the background while playing my own tracks. * Music companies could pay Pandora (or forego streaming fees) to get new music out there. It’s like the old “payola” system, but can be engineered to only play for users who might actually like the music, and only puts it in the queue a few times so it doesn’t annoy them. (I would encourage Pandora to visibly display that the track was sponsored, and respect the user’s decision if they thumbs-down the suggestion.) * It’s more sustainable. It makes no sense to waste so much Internet bandwidth streaming songs to people who already own them. * Pandora could allow _the user_ to select the mix of local vs. streamed music. That way the user also controls how many ads they hear (which are only needed to pay for streamed songs), or the user could set a monthly bandwidth cap to avoid going over their mobile plan limit.

Seems like a rather obvious solution to me, I don’t understand why it isn’t also painfully obvious to Pandora’s 740 employees.


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