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If Pandora goes the way of Amazon, what’s next?

The fascinating world of online stuff and online music sharing continues to navigate its strange post-modern course as worried projections about and Pandora Media waft across the news/blogosphere. What do Pandora and Amazon have in common? They function in an environment in which revenue and profits appear to depend on technology, but in fact depend on (or flounder on) government and law.

In the case of Amazon, investors are realizing that the Internet retail giant’s razor thin profit/revenue margins have to a significant degree rested on the entity not paying state sales taxes. “Within a few years, I would expect that substantially every state in the union — or at least all of those with populations large enough to matter to a nationwide retailer — will be collecting sales taxes from Amazon and other online retailers,” writes Charles Sizemore over at Forbes. “The effect on Amazon and holders of Amazon stock is crystal clear: It’s bad.”

Thus The New York Times wonders if the “20-year honeymoon” between Amazon and its investors is coming to an end, as a small army of Wall Street analysts lowered their ratings on the company on Friday.

Similarly, the market is squinting at Pandora and listening to the blunt words of Brandy Betz over at Motley Fool.

“Pandora actually loses money with an increase of listeners, thanks to content-acquisition costs,” Betz writes. This is true. Bette Midler can grump all she wants about how much Pandora pays her in copyright royalties, but the truth is that the streamer’s royalty burden is a lead ceiling over not only its future, but the future of online music. Meanwhile terrestrial radio pays zero zilch nothing in performance royalties to musicians. This has nothing to do with technology and what folklorists like to call “free market capitalism.” It has everything to do with politics.

Where is all this going, online music sharing wise? I don’t know. But there are alternative models to consider.

The YouTube/Soundcloud commons model. In this system the Digital Millennium Copyright Act protects these huge music repositories from crippling copyright violation lawsuits, and they lease their libraries to smaller entities, which then share them in interesting and creative ways. This is how and function.

The Bandcamp model. In this system artists post a portion of their music for free and offer the rest of their content for sale. That’s how it works at Bandcamp. Fans can deploy the free content in various interesting online ways, drawing further public interest in the music. Example: go over to the Progressive Rock Music Forum and there you will find various Bandcamp recommendations.

The listener supported model. Basically streamers create interesting musical genres and fans contribute to keep service going. This is the model.

The erzatz all-of-the-above model. The classical music website Sinifini roughly adheres to this approach. It’s basically a smorgasbord of Spotify playlists, YouTubes, interviews, articles, and forums. But, obviously, it’s very dependent on other extant services.

Here’s a model I am less enthusiastic about: the oligopoly throwaway model. Under this system Apple and Microsoft and similar hegemons maintain dreary unimaginative “radio” services that sustainably function because they represent only a tiny percentage of the entity’s costs. See iTunes Radio and Xbox Music as examples. They’re basically second thought online music services that the one ton gorillas have rolled out because, well, wuddever.

All of these models have their exciting and innovative qualities. I’m not sure any of them will work much better than Pandora,, or Spotify. Was it any better a century ago when the “Big Three” (Edison, Columbia, and Victor) ruled the roost? Good question.

I keep thinking that there’s some public media model that might solve lots of problems, but I haven’t come up with how it might work yet. ‘Oh no,’ you say, ‘that would get the government involved.’ Guess what: it already is.

We cover social music sharing communities every Monday in our Internet DJ feature.


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