Good Idea :: Pandora

Let’s start with a really good idea. One that I hope is successful financially although there are some major risks. Pandora started as an idea called the music genome project and has become an internet radio service.

[We] set out to capture the essence of music at the most fundamental level. We ended up assembling literally hundreds of musical attributes or “genes” into a very large Music Genome. Taken together these genes capture the unique and magical musical identity of a song – everything from melody, harmony and rhythm, to instrumentation, orchestration, arrangement, lyrics, and of course the rich world of singing and vocal harmony. It’s not about what a band looks like, or what genre they supposedly belong to, or about who buys their records – it’s about what each individual song sounds like.

Source: Pandora.com

They allow you to create your own “station” that playes only the music you like. Including ones that you’ve never heard of before. You tell them artists or songs that you like and they begin streaming music for you that is taylored to your specific tastes. You can even learn more about the attributes of the song you’re listening to or more about the artist. Check out my own station Mobley Radio or create your own.

Their primary known revenue is from selling songs that have been bookmarked while listening to a station (Amazon mp3 or iTunes). Secondary known revenue source is from advertising (graphic ads on the web page not audio ads). Even though I have other sources for purchasing music I’m inclined to purchase it thru their affilate program since they’re the ones who introduced it to me.

An unknown source of revenue, that may actually be their greatest channel, is through sales of the market research that they appear to collect seamlessly. A label can come to them with new music; they identify the characteristics; match it to fit with the style (based on the “genome”) of multiple “stations”; and record the thumbs up / thumbs down responses of the listeners. That would provide a good gauge if that artist would be successful. Pair that with basic demographic data like age, sex, zip code, etc that they already know and it could be quite powerful and valuable data. To me this seems like their best funding source.

The risk is that the costs in classifying large amounts of music costs a lot of money unless they found a way to automate it. Also, the revenue from music sales and ads may not cover the licensing costs for the music streaming service. If they are unable to maintain the free model they will likely switch to a “subscription model” or “listener supported” format.

Hopefully they make money and continue to imporove the service. In our book Pandora gets an “I Like It” or what we call a “good idea”.