What does Pandora think of Apple’s apparent plans to launch a music streaming service?
One Wall Street analyst posted that question at the fall conference in Las Vegas of the Telsey Advisory Group.
While not mentioning Apple by name, Pandora VP Dominic Paschel said some of the on-demand providers in the U.S. have always had a radio-like feature and you have to ask: Is the company creating a true competitor or just the next iteration of their product?
When Pandora entered the online music service market in 2005 there were entrenched players like AOL and Microsoft, noting that 80% of audio consumption still takes place in a “radio-like” setting and most consumers don’t want to pay for music.
He cited recent NPD data that shows half of U.S. consumers don’t want to pay for new music and 36% would pay $15 or less.
Pandora has a $36 annual subscription service for those who don’t want to hear any ads with their music, however, most of its 56 million active listeners use the free version, according to the executive.
Asked to comment on the music royalty lobbying being conducted on Capitol Hill, and specifically the anecdotal evidence that the Copyright Royalty Board has never decreased content costs for a distributor, Paschel said that 54% of Pandora’s revenue goes to music royalty fees. Most of terrestrial radio pays in the single digits and satellite radio pays 7.5% of its revenue to music royalties.
“We think there are structural issues there,” he said. Pandora supports a bill that supporters claim will level the playing field for music royalties among digital audio services.
Part of the issue is the CRB had to set rates when the industry was “nascent,” he said.
