Every time Pandora launches another feature or fee, bloggers read the tea leaves and find another harbinger of doom. Things looked exceptionally dire in late February, when the Oakland music startup decided to cap free mobile listening at 40 hours a month, and charge 99 cents thereafter. Cynics took it as a sign that the famously unprofitable company which had finally managed to figure out a viable revenue model for its desktop service couldn't accommodate the shift into mobile. Even Pandora CEO Tim Westergren seemed a little crestfallen, blaming the new fee on escalating per-track royalty rates in a company blog post.
So when Pandora announced another new feature last week, the naysayers were ready to pick it apart, too even if the idea seemed like a smart spin on a tried-and-true concept. Yet few could find any downsides to Pandora Premieres, a station the company launched in order to preview unreleased tracks and extra content (interviews, etc.) from forthcoming albums. The station will play tracks from a few select artists every week, targeting audiences whose tastes seem to match their material. (So far it's featured John Fogerty, Laura Marling, Portugal.The Man and City and Colour). At the end of the week Pandora will refresh its content, borrowing the old broadcast radio move of hooking an audience in, then pulling the plug and telling everyone to buy the album.
"It's certainly one of the old theories," Westergren said in an interview, explaining that radio playlists have long served as an invaluable pipeline for record labels to shill new products. Yet Pandora has many attributes that make it a much more attractive vessel. One of them is scale with more 200 million registered users, 70 million active monthly listeners in the US, and a 7.33 percent share in total U.S. radio-listening audience, Pandora boasts a much wider sphere of influence than any terrestrial station. Another is specificity. The holy grail for advertising, these days, is to reach a targeted audience, and Pandora's economy of "likes" and "dislikes" provides the tool to do that. On Tuesday Pandora also unveiled a new Timeline app to further integrate user playlists and preferences into Facebook.
"It's solving what's always been a perennial problem that you put a new album out generically in front of a quarter million people, [without] knowing who would like it," he said. Pandora knows exactly who would like it they have all that data aggregated in a vast archive of thumbs-up and thumbs-down signs. Clumped together and charted out over time, those little symbols draw profound conclusions about user taste, both for individual listeners, and listener groups. Like Facebook, Pandora knows things about you that you might not know yourself including what you might purchase from iTunes next week.
That led some bloggers to speculate that Pandora might be getting these tracks as freebies, to serve as a kind of "promotional vehicle" for album sales. While Westergren wouldn't disclose the licensing arrangements that his company had made with any single artist or record label, he suggested both sides would profit. Record labels have long maintained a symbiotic relationship with the radio stations that preview their music, and this system would be even more exacting, he said.
So far, record companies have shown enormous enthusiasm, sending Westergren an avalanche of new albums to preview. If all goes according to plan, Pandora Premieres may stanch recent bloodletting in the industry, while providing a new revenue valve for Pandora as it tries to commandeer the mobile market. Ironically, it also shows that a company born of lofty scientific notions about creating a music "genome" can only survive if it behaves like a traditional radio station.
Pandora changed the way we listen to music, and it carved a new industry that's become increasingly crowded on Monday, Apple inked a deal with Warner Music Group to launch its own service. But it's only succeeded by borrowing the advertising model of old-school, unglamorous, FM radio. Perhaps there's something to that truism that most innovations are just fine-tuned versions of what came before.