The structure of the music industry

Amazing insights from a friend today who knows music inside and out. In short: maybe Pandora is the next Netflix

Pandora is massive. $5bn market cap, #1 in most radio markets, more valuable than Clear Channel, up 200% this year as a stock. 80% of listening is lean-back radio, not lean-forward playlisting in the world.

Spotify is big with 1mm subs in the US but Pandora has 3x, and all the other subscription services are much smaller.

The next frontiers are many — cars, homes, etc.

The phone is where the action is and P does amazing stuff to play the exact right song next. I used to laugh about the “Beatles hypothesis” on Pandora, that eventually all stations end up playing a Beatles song. Not true. There are 50 different algorithms running, trying to select the perfect next song — based on time of day, who you are, what you like, where you are, and much more. And there is another algorithm that picks the winning algos and kills the bad ones (people vote likes/skips).

Do artists get paid? Not by radio — only by Internet folks like Pandora and Spotify, and whatever their complaints, they aren’t that different from the 1960s when managers were crooks or the 1980s when labels were crooks or 2000s when listeners were crooks (right Metallica?). Can’t please some people.