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That Digital Music Service You Love Is a Terrible Business (fortune.com)
An anonymous Slashdot reader quotes an article from Fortune:
Rdio goes bankrupt, Pandora hangs out a 'For Sale' sign and then gets rid of its CEO, artists and labels ramp up their criticism of YouTube. Now we have Tidal in acquisition talks with Apple, while Spotify complains about Apple treating it unfairly... the digital music business is becoming an industry in which only a truly massive company with huge scale and deep pockets can hope to compete... Rdio went bankrupt last year in large part because it couldn't afford to make the licensing payments the record industry requires of streaming services. Deezer, a European service, postponed a planned initial public offering partly because its business is financially shaky for the same reason... [Rhapsody] is still racking up massive losses... Spotify has found it almost impossible to make money, primarily because of onerous licensing payments...
[A]ll the available evidence seems to show that the digital-music business, at least the way it is currently structured, simply isn't economic. The only way for anyone to even come close to making it work is to make it part of a much larger company, like Apple or Amazon or Google. That way they can absorb the losses, they have the heft to negotiate with the record industry, and they can find synergies with their other businesses. In other words, music as a standalone business appears to be dead, or at least on life support.
The article links to an essay by a former eMusic CEO arguing high royalty rates make it impossible to have a profitable business, and the music industry "buried more than 150 startups -- now they are left to dance with the giants."
[A]ll the available evidence seems to show that the digital-music business, at least the way it is currently structured, simply isn't economic. The only way for anyone to even come close to making it work is to make it part of a much larger company, like Apple or Amazon or Google. That way they can absorb the losses, they have the heft to negotiate with the record industry, and they can find synergies with their other businesses. In other words, music as a standalone business appears to be dead, or at least on life support.
The article links to an essay by a former eMusic CEO arguing high royalty rates make it impossible to have a profitable business, and the music industry "buried more than 150 startups -- now they are left to dance with the giants."
So it seems like there's 2 problems here :
1. These "services" all offer an awful lot of service for free, but have to pay per song played. This is a guaranteed trip to the poorhouse.
2. Those payments per song? They don't go down with scale or time. Google and other internet companies, their cost of delivering service goes down with technology advances and sheer size. It costs google a lot less to deliver gmail service or web searches than when they started.
The only way this can work is if the record labels - who own everything and do not have to pay themselves - offer a service. Kind of how all of the free porn sites who also own most of the porn producers are owned by the same company.
It's another thing I can get for free.
So what? Most dot-com businesses are losing tons of money these days. Most e-commerce is losing money hand over fist. It seems that investors are fine throwing money at unprofitable businesses for some reason.
I don't respond to AC's.
Instead of working closely with the smaller companies to create a diverse and competitive market, their predatory (legal) and greedy (bad business) tactics caused the shutdown of many music startups, angering music lovers, and ultimately, they are shooting themselves in the foot because when only have Apple and Amazon to deal with, they will:
1. Negotiate terms that leave the music industry with lower profits
2. Eventually launch their own music labels, mimicking what Netflix did with Movies & TV series, to create further leverage
All those moments will be lost in time, like tears in rain... time... to... die...
Easy to pirate, easy to store. No excuse for people to not already have a large personal music collection.
Seriously...pay for music?
Why would I do that?
John McAfee 'It was like that time I hired that Bangkok prostitute; to do my taxes, while I fucked my accountant'
You're not stealing from the artists; the recording labels will steal it anyway. Seriously; the music and movie cartels are thieves, and you're not "stealing" anything from the artists by pirating music. Now, I will encourage you to buy music directly from unsigned local artists, as they actually get paid for their CD sales.
That business where Pandora lets people stream music for free isn't making much money? Holy crap!
Slashdot: providing anti-social weirdos a soapbox, since 1997.
What's so terrible about Bandcamp (which is the digital music service I love)?
They seem to be doing pretty good, they're growing as well as being profitable.
Best part (IMO) is that they also have lots of artists saying they appreciate Bandcamp. Here are some comments from that blog post:
Bandcamp is the greatest platform for independent artists. I am glad to be a part of it, without it getting new fans would be difficult.
We release small independent music compilations since three years here on BC. We worked together with more than 200 artists in these years. The most of them publish their music on BC too. I can confirm: More people buy the music on BC. That is what the musicians say in talks. And even our pay what you want releases have a really good perfomance.
I've bought a lot of really great music on Bandcamp, the artists like it. So yeah, what's so terrible again?
I get that artists have very bad deals with how much a take they get. And that with people spending less to owe music and embracing more and more the use of streaming services, so that they can listen to what they want where and when want at a reasonable fee is more fun tailored to them, then music radio stations. I may prefer to owe my own music and stream it to my devices myself or use cloud storage lockers for backup and less data usage on my home net connection, but maybe artists could make up for loss album sales by partnering with services to offer extra content that people buy as a "in-app purchase" like concert recordings, rare music, no longer in print music, and more. There are many artists already sort of doing this through patron services; for instance Amanda Palmer seems to be doing really well with people giving just a dollar or more a month and in return get a new song, a new ep, or something else that is creative in return. Unfortunately, most artists would need to make deals with their labels in order to any of this, despite many having fan club subscriptions.
Music streaming is merely Net Radio that people can control, yet the music industry lobbied for the much higher per-play fees to either stop it from becoming viable or out of greed. Now that is so widely used by all ages, better measures listener volume, gives people what they want, while so few people use the radio compared to say 10 years ago artist and the like are claiming it is not enough money and prices need to be raised. How about letting business's like shops, restaurants, bars, hotels, offices, etc get broadcast license so they can legally use those services and make it easy? Most mom and pop places seem to use Pandora, yet no one seems to know you have to opt for a special box for your speakers to make use legal and the only other legal service that is easy to find is HotelRadio which can be laggy at times. If you contact Apple about their Streaming Service, Spotify, Google, and so many others all say "We do not offer nor plan to provide a service tier for businesses!" Pandora does it in a pain the butt way through a 3rd party deal. For whatever the reason why no one seems to offer a good method, I would think most companies would be willing and happy to pay $100 six month or yearly subscription to legally offer music at to customers and staff. Services could geo-locate a place and stop working until the account is paying for the business license. Most people that own small businesses and even large ones eyes glaze over if you tell them can't play music without a license or could face large fines.
Just saying their could be far more money to be made without effecting the basic consumer and killing services. And, the per play fees do need to drop. Why should a estimate of listeners cost per play be set so less for radio, while actual backed up numbers fees are so much higher for streaming? If anything radio and net streaming fees rates need to swap.
Stop buying music from companies that charge rediculous licensing fees. Taylor Swift has no more talent than the talented girl next door. Go fund indie music. It's more free, you're supporting the little guy/gal, and the talent is just as good even if the production quality isn't.
Yeah, the RIAA is an ass, but so are most music consumers who mindlessly buy into the big-dollar/nose-candy-fueled publicity of big labels. A multitude of amazing indy artists would gladly reasonably license their work but the sheeple kiss RIAA ass and only listen to expensively advertised big names.
There are more unsigned artists than there are artists signed to record labels. A great many, probably most, artists stream their stuff for free. MySpace is no longer a general social networking site, it's a million bands giving away their"music free or almost free.
Since most music is not made by record labels, why do people seek out the music produced by labels? Apparently there is something of value there, Maroon 5, Justin Bieber etc have many more fans than Leannasaurus Rex. Why do people want the music produced by labels? What's the extra value vs independent artists and small labels?
Labels do three things that I can think of:
1) They filter, they "discover" good artists. On Myspace you can find plenty of bad indepedents before you find a good one.
2) They hire the top engineers and producers and build multi-million dollar studios to produce the sound that people like to listen to. Independent artists may not even know what a compander IS.
3) They promote the professionally produced recordings featuring the selected artists. In other words, they let you know "hey here's another good country/hip hop/pop singer you might like".
Most people don't choose any of the hundreds of thousands of independent artists. Instead they prefer to choose among the dozen or so that the labels are offering that week.
Personally I don't choose either for my own listening. I listen to informative recordings. Sometimes I DJ weddingsband other parties. When I do, I choose music from record labels because of #3 - people at partiew want to hear the same music they've heard before, the music promoted by labels.
When examining whether a business is, or can become, profitable - you can't just look at expenses. You have to look at the income side too.
The submitter, and the linked articles, signally fail to do so.
Should have warned us at the beginning of your post that you were a DJ.
Would have saved us a lot of reading.
John McAfee 'It was like that time I hired that Bangkok prostitute; to do my taxes, while I fucked my accountant'
and they industry has always been awful except for a few people at the very, very top. This is new how? Outside of socialism and basic income I don't see a way around this. It's like anything where you've got people who do it because they love it. You can pay them a lot less than their actually generating.
Hi! I make Firefox Plug-ins. Check 'em out @ https://addons.mozilla.org/en-US/firefox/addon/youtube-mp3-podcaster/
Subscribed for years, they died a few months ago. Odd thing was, my favorite channels were the old radio dramas from the 30s and 40s, and the attempts to revive the form in recent years.
Had a couple prog rock channels I'd listen to as well, but the old time radio seemed to be my go to thing.
Rusty Hodge has been running SomaFM.com for years just on donations. Someone should interview him - he seems to have it figured out. If you haven't given SomaFM a try you should - and donate a couple of bucks if you do.
bittorrent you say?
No, IMO, the problem is that there are too many middlemen. The Internet service takes its cut, followed the the performing rights organization (e.g. ASCAP, BMI, or SESAC), the publisher takes at least half of what is left (and probably more), and the tiny crumbs that remain get divided between all the composers and lyricists. The artist probably gets nothing unless he/she is a singer-songwriter or there's some other specific arrangement with the publisher. Either way, the more middlemen you have leeching off your music, the less you'll make from it.
Check out my sci-fi/humor trilogy at PatriotsBooks.
Posting to undo a mis-clicked mod.
Oliver.
The content belongs to the artists and the publishers. Let them decide whom to deal with and on what terms. If they don't like startups, probably they are not okay with smaller cuts. They have full freedom to decide who to deal with and who to avoid.
------
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Myspace realy somebody still goes to myspace? The costs of distributing music is close to nothing.
Multimillion dollar studios, not sure what decade you're living in. Do you still think a modern audio engineer is doing the final mix via a big board in real time? You do relize DJing is absolutely nothing like a real recording studio?
Mass market music exists, it's neither good nor something we need to insure is protected. If they can make money at it they will and frankly thats more an example of how you can use marketing to sell crap than promoting good music.
No sir I dont like it.
It's precisely this dynamic of businesses having enough capital to operate in the environment that leads to a regulated environment for competition. Or it leads to a single point of failure.
Introducing the EvilViper Streaming Music Service.
Front-end looks just like Pandora/iHeartRadio/etc. But on the back-end, it searches all the MP3s on your device to see if you already locally have the song it was going to play. If so, file is played locally, not streamed. No bandwidth is used, and no royalties need to be paid. Customers appreciate the superior sound quality, less cellular data usage, and fewer pauses between songs.
In addition, when you like/thumbs-up a song, in the background it is PURCHASED as an MP3 from Amazon or similar. You don't notice the purchase, but you now own the song. Repeated plays cost nothing. If your device is reset, or you use the music service on a different device, the songs you purchased are first downloaded from Amazon and playback resumes.
The EvilViper Streaming Music Service will also make deals with smaller and independent artists and labels. Those who offer the cheapest terms will see their songs featured more prominently, and repeated more often (until/unless customers vote not to hear them again), at the expense of a little less big-name music, for a big savings.
Slashdot gets worse every day... Pipedot: News for nerds, without the corporate slant
Some of the best, most classic music, was produced with nothing more than a microphone and a tape recorder. When you have real musicians, that's all you really need. The rest is just fluff that adds little to the end result. The labels don't care because they push all costs off on the musician. They have no interest in being efficient or being the adult in the room.
So the recording industry became a dinosaur much like the Detroit auto makers.
A Pirate and a Puritan look the same on a balance sheet.
... and still run by the founder. Magnatune ... I love it and have gigabytes of their music, much of which is regularly played..
now we need to go OSS in diesel cars
...and a lot of that music was distributed for free.
Free distribution of media has pretty much existed since the beginning of time for the sake of this discussion. Commercial supported content began about a week after the first radio station went on the air.
There are bands that I have enjoyed for years without pirating or paying one red cent. That's because "free music" is in fact nothing new. The only reason that Pandora is having a hard time is that the music industry decided to be leeches this time rather than paying to promote artists.
This whole getting paid versus paying makes a big difference.
A Pirate and a Puritan look the same on a balance sheet.
I wonder if you have an idea why approximately nobody (well under 1% of listeners) prefer that great music recorded with nothing but a tape recorder, with no post-production work? Virtually everyone inside buys or unlawfully aquires the heavily produced studio work.
Anyway, your comment reminded me of "Million Dollar Quartet". Itcs a raw recording from the famous Sun studios with no production work. The artists are Elvis Presley, Jerry Lee Lewis, Carl Perkins, and Johnny Cash . If you like raw recordings, that's definitely one to check out.
"...the average payment to an artist from the label portion of that is $0.001128, this being what a signed artist receives after the label's share..."
http://thenextweb.com/apple/20...
> The Internet service takes its cut, followed the the performing rights organization (e.g. ASCAP, BMI, or SESAC), the publisher takes at least half of what is left (and probably more), and the tiny crumbs that remain get divided between all the composers and lyricists.
You have this slightly out of order. It should be:
ACAP/BMI/SESAC and the publishers take their cut (which is ~90% of the proceeds from the play), the internet service (eg Pandora) takes its cut, and the remainder is divided up between the composers, performers, and lyricists.
The Internet Streamers get fuckall, but the folks who actually did the work get even less. You're absolutely spot on about removing middle-men, though.
I just came here to say: FUCK Rhapsody. Their shitty code ate up and FUBARed a dual boot machine about 18 years ago. Never again. Die in a fire. Bitches.
There are competitors to Spotify?
if nobody wants to pay to see him in person then maybe his books aren't very good.
I've said this all along.
Say Spotify gets $10 a month from you, they take $5 for themselves and their expenses then they just divide the other $5 up evenly between whatever artists you listened to weighted by number of songs and time. Don't "pay per play" instead "pay what's available". If you only listened to one artist in that month, that artist would get all $5, even if you listened to only one song.
Then Spotify is simply guaranteed $5 a month, and royalty fees take care of themselves.
They don't make the free stuff more restrictive nudging users to the pay subscription. The problem today is people want content but don't want to pay, they don't want ads, don't want to be tracked, or personal info used for ad targeting. If any of these services are to survive, they must reduce free services, and expand paid ones. You also must except that maybe offering a cheaper paid listen only is a better option for some.
Book readings
Geocities for life!
As an older guy with hundreds of records and CDs who wants to keep building my own library of digital music but doesn't have to pay for songs I don't like to get the ones I want (figure it out), I'd be interested in a service where I pay a minor subscription fee ($10-25/year) for the right to stream an album or two at a time, so I can check out new music that interests me. Then pay maybe 99 cents per song for a decent DRM-free MP3 download for the songs I like and want to keep. A FLAC download for the snobs could cost a bit more per song.
I don't want to pay the larger monthly fees for today's streaming services because most of the time I listen to the thousands of songs I already have. I just want to be able to evaluate new music in a convenient and affordable fashion, and pay a reasonable price for what I want to keep.
Why stream albums instead of mixes like what we have now from Spotify and the like? Because that's how I evaluate music. Again, older guy. No reason the service couldn't do both, but I want the chance to hear everything from artists I'm interested in, not just the hit(s).
This makes sense for those of us who already have a music library, who were conditioned to the idea by the need to buy stuff if you didn't want to be at the mercy of local radio programmers. We've always been a minority, but we're the minority that invests time and money into the industry, so we would seem to be worth catering to. Does it make sense for the potential market of younger collectors with different habits shaped by torrents and streaming services instead of radio and record stores? I think so, but doubt the industry will ever get it together enough to let us find out.
I don't know about you guys but I'm starting to have enough of all those big and all-powerful companies and their copyright/patent claims. All they want is money for themselves and no one else. Anyone who stands in between them and their goal has absolutely nothing to say and no chance to defend himself with a cheap lawyer one can only hope to afford.
And they are all equally malicious: music industry, insurance companies, big brands telling us that we can't get away without using their services tricking us into long-lasting contracts and unwanted purchases.
I hope that one day I can quit my job and go live in a desolate part of the world where the tentacles of big corpos do not reach and where I can drink wine, hook up with women and play bass until the end of my days.
But that will be no sooner than I hack the hell out of corpos, wipe their backups clean and watch them go under. Then my life will be fulfilled.
You can't and you shouldn't monetize everything. The record labels are doing nothing but holding everyone back / down. With modern infrastructure, everything a band should need is a capable manager.
I don't know how American system works, but here in Europe, all the money (even the money that should belong to artists that are already dead) goes to some "organization", that further distributes the money among members of the organization, the music copyright owners.
It's an outdated system that doesn't allow for competition. The only measurement of success (how much money from the "common fund" you receive) is how many times your song is played on national radio. It's just as stupid as it sounds, it's not natural and shouldn't be considered acceptable.
There is no money in selling digital music. Sell T-shirts and concerts instead.
Since most music is not made by record labels, why do people seek out the music produced by labels? Apparently there is something of value there,
Time largely. I don't have all day to research out music that I would like to hear. So for years, we trusted that the major labels would sift through the dross and bring to us good music.
But this is no longer true. Modern Pop music is pretty people who may or may not be able to sing. Dancing is more important to pop music today than music. Coupled with ADHD hooks and psychotic lyrics, it's obvious that the trust is broken. And this trend of marketing to 12 year olds, either in age or intellect, has gone on much longer than trends in music usually do.
The shepherds did so well protecting the flock that the sheep no longer believed that wolves existed.
This whole problem could be boiled down to the fact that Corporations are allowed to own the "rights" to Copyright. It is fabulously profitable. They lobby for it. Artists want to keep it, because they can get a big payday. Corporations transfer rights to other corporations...
This would all be solved by either caps on the term of copyright to something reasonable, say 10 or 20 years, or by simply not allowing a corporation to hold rights to copyright. If they want to sell your song, they pay a human to do so, etc... Rights are non-transferable. i.e. they die with you. Though hopefully that doesn't spawn a whole bunch of artist assassins...
You right though, copyright currently is doing exact the opposite of its intended purpose. The purpose is to provide some control over work to artists to make money to encourage them to make more art. Now, why bother, hit your payday and retire for the next 150 years or so.
You poor urchin, you ungrateful soul, are to weep for the millionaire whose investment has not returned the triple figure yield he was promised by the corrupt usurer.
There are few thousand filthy fucking rich narcissistic posers in this world who literally think everything is about them, and by continuing to give in to these lowlifes vanity and contribute towards the pomposity that is their drug induced, morphine and methamphetamine enhanced lifestyle, you only convince them more that they actually deserve to receive from you who is struggling to pay the bills, collectively, more than $20 Million per year for doing nothing. Nothing at all. Nothing valuable, nothing productive, nothing but being a useless scourge on the limited resources that man requires to live a sustainable lifestyle.
These self-righteous "UN peace ambassadors" who do not do a single thing that doesn't serve themselves would lead you to believe they might have actually done an ounce of good in the world. You're fucking retarded if you believe that. They're getting richer by the day while they ask you to sacrifice your meagre existence towards contributing towards their causes.
These sex obsessed philanderers spend more time looking in the mirror than they do any good.
Now remember that these are the same people who would try convince you that you are to blame for them not being able to significantly increase the lavishness of their lifestyle. Greedy fucking thieves.
While the world struggles with its most unstable period in recent memory, with deflationary cycles world wide, rampant disorder and terrorism, declining democracy and individual freedoms the scum that inhabit the air waves with their garbage tinned pop culture blame you. You are to blame for everything they have corrupted with their propaganda and filth.
Ignore them, forget them, let their creation rot for they represent the true sins of excess. Sloth, greed, envy, gluttony, pride, lust and wrath.
They lazily sit there pretending they work hard while you break your back and mind.
They greedily take more and more and demand it and consume and envy those with more and fill their desires with lust and gluttony. Their lust exhibits in the sex they so forcefully broadcast.
Their pride is vanity in its worst form.
And their wrath is the countless lawsuits they use as warfare against the less fortunate.
American idol or American psychopaths. That is the question?
The 21st century tragedy.
Fuck you all.
[...]
Econ 101: you get what you pay for.
+1 Wish I had points right now. ./ like most of the interwebs faithful avoids the truth like they avoid paying for music. They then want to bury it as quickly as possible. They then wrap themselves in some of the most cognitive dissonance laden thought processes powered by the Dunning-Kruger Effect that humankind has ever seen.
“Men occasionally stumble over the truth, but most of them pick themselves up and hurry off as if nothing ever happened.” - Winston S. Churchill ~
Pandora pays royalties to the PROs, so no, the order isn't wrong. That's the order in which the payments occur. It was not intended to be ordered by amount of dollars kept, but rather to show the flow of money downhill, starting from the company that takes the money (e.g. Pandora) and ending at the people who actually did the work to create the music.
Check out my sci-fi/humor trilogy at PatriotsBooks.
which is fine with me, i prefer to pirate it anyway.
Do you actually believe a large number of performers write their own music?
The number of singer-songwriters is large enough to be notable. Otherwise, the Wikipedia article about them would probably have been deleted by now.
If the music industry wants to increase the profitability of online services, then they need to increase their user base. That's probably going to mean producing music or other sounds that people want to listen to, which is something they haven't done for a generation now.
Birds are not dinosaur descendants;birds are dinosaurs, for all useful meanings of "birds", "are" and "dinosaurs"
Creative Commons.
It is pitch black. You are likely to be eaten by a grue.
Fred's assertion, as I understand it, is that the advertiser base underlying the no-charge tier of Pandora and Spotify isn't "robust".
Certainly don't love it . Most of us just want play - often for free.
Get up!
The article links to an essay by a former eMusic CEO arguing high royalty rates make it impossible to have a profitable business, and the music industry "buried more than 150 startups -- now they are left to dance with the giants."
That's the free market, companies compete and some loose.
This includes large, powerful, companies with a large warchest and established income stream against new and unknown upstarts starting small.
No, IMO, the problem is that there are too many middlemen. The Internet service takes its cut, followed the the performing rights organization (e.g. ASCAP, BMI, or SESAC), the publisher takes at least half of what is left (and probably more), and the tiny crumbs that remain get divided between all the composers and lyricists. The artist probably gets nothing unless he/she is a singer-songwriter or there's some other specific arrangement with the publisher. Either way, the more middlemen you have leeching off your music, the less you'll make from it.
This is an inevitable consequence of the public not paying attention to legal ethics issues - one of many.
A rational legal system would not allow contract law to favor the middlemen. There would be a guaranteed minimum cut for any song writer or actor or other performing artist for ANY commercial usage of their work.
But artists as a group are very poor (despite the rare individual exception), and big business is wealthy, and the lawyers want some of that money. Both groups have a vested interest in stealing money that would otherwise go to the artists. The lawyers thus ensure that contract law supersedes fundamental rights, and then use those contract to take away ownership from the artists, giving it to the corporations, taking a big cut initially, and getting ongoing business relating to those contracts for the rest of their lives.
Worse, the lawyers are allowed to donate huge amounts of money to the political parties to ensure that the unethical status quo doesn't change. They not only influence the writing of the law, but also the selection of judges.
Much the same thing happens with patent law, with many lucrative patents being owned by lawyers, and the system itself horribly screwed up to create lots of long term business for the lawyers, but also primarily looking out for the interests of big business.
It's the same sort of process that led to the continuation of slavery when the USA was founded - the lawyers and the wealthy conspired to have a legal structure that worked to their benefit despite the fact that everybody with a functioning brain knew that the long term continuation of slavery was morally wrong, and also necessitated unethical practice of law in a nation founded to "protect the rights of man".
The problem isn't music sales. The problem is streaming music. It's not a sale. You rent it. You own nothing. You control nothing. This is a problem for a generation (or two) who doesn't seem to care about owning anything. It will come back to bite you in the ass. (And not just music.) My prediction is, that long term, all streaming music services will ultimately fail.
...I buy my music, and I don't care if streaming survives. Or:
Na na na na na na na na na na na na [x2]
I guess you just lost your streaming,
I don't know where your connection went.
So I'm gonna play my great tunes,
Downloaded and paid, no rent (nope)
I got a brand new player and
I'm gonna use it tonight
Who needs to stream anything
I permanently have my rights
Na na na na na na na I permanently have my rights
Na na na na na na na I permanently have my rights
[Chorus:]
So, so what
Still hear the rock stars,
I got my rock files,
And I don't need you,
And guess what,
I'm having more fun,
And now that we’re done,
I'm gonna show you tonight,
I'm alright,
I'm just fine,
Streamer's are all fools,
So, so what,
I still hear [the] rock stars,
I got my rock files,
And I don't want you tonight.
Wish i could find the article from way back when, but basically the RIAA got some crackpot economist to talk to the FCC and convince them that companies like pandora (Internet streaming music services) had to pay more money than radio. Basically Pandora back then had no adds and was paying company A once for the right to stream one song on multiple radio stations (remember, pandora lets millions of people around the world create personalized radio stations). After this ruling pandora had to pay a fee for EVERY SONG per RADIO STATION. So if i listen to lady gaga's 'just dance' on my station, while beyonce listens to it on her pandora station, pandora has to pay for each of those streams.
Over night pandora's economics where changed and they felt the noose of ridiculous royalty payments wrap around their neck. Within the week pandora.com was blanketed with adds, both visual and auditory in an attempt to pay what is basically extortion to the record companies.
The fact that pandora is still around years after this repressive licensing scheme is a testament to their tenacity. But until we the people rise up and demand fair licensing fees, pandora's days are numbered (and so are other internet streaming music services)
THAT is why the economics of these companies are no longer sound. The RIAA colluded with the government to destroy Internet radio, if it weren't for that we'd have a very health and competitive market in internet streaming services.