10 Comments

Why Apple Needs Pandora Just as Much as Pandora Needs Apple

September 11, 2008 by in Random with 10 Comments

Pandora, the internets leading streaming radio service, is in trouble. With rising fees from Soundscan (The company responsible for dispersing online royalties to artists) Pandora is facing a shutdown.

Apple, with iTunes 8, has shown their interest in predictive playlists – Pandoras specialty. They use this predictive playlist not to showcase your music but to also promote songs you want to buy from the iTunes store. Yea, the predictive playlists are beneficial to the user but were designed as a revenue generator for Apple and the iTunes store with the (turned on by default) Genius sidebar.

With Apple being in the position of being “the largest music retailer” they have strong relationships with record companies and have the ability to negotiate strong contracts regarding royalties or commissions labels should receive possibly reducing the fees required to run the service.

Apple should buy Pandora use their predictive and streaming technologies as a promotional tool for the iTunes store. Keep the Pandora application for the iPhone but build in the technology to iTunes. Give both applications the ability to tag and purchase a song via iTunes which is a pure revenue generator for Apple. It’s not like Apple doesn’t have the money, matter of fact they are sitting on a 2+ billion war chest and using just a fraction of these funds to acquire Pandora could spur the entire investment back in profits from iTunes sales.

UPDATE: Due to an inadvertent typo Apple’s war chest is 20+ billion.


  • Zoli

    I was thinking the EXACT same thing yesterday!

    Great idea, and can really benefit both sides.

    Let’s hope this happens so Pandora doesn’t die.

  • Seymore

    In case you missed Tuesday’s big Apple press conference, iTunes 8 now includes Pandora-like features to build playlists and make recommendations for purchases. The only thing missing is streaming. That would be easy enough to add but I don’t believe they will. Bottom line is Apple doesn’t need Pandora.

  • CognizantKid

    Definitely a good idea. They could rebrand it as “Genius Radio”.

  • Alan Smith

    I thought Apple had a 20+ billion war chest. That is quite a lot more than 2.

  • tommy

    Aapl matter of factly is sitting on a $20bn war chest….the could not only buy Pandora but the 4 major labels as well if they wanted to do (Warner e.g is only valued at $3bn) and anti trust bodies would allow it….still I think it’s just wishfull hinking that they will buy Pandora as a going concern. It almost makes more sense to pick off some of Pandora’s IP after it closes down. Linking of digital radio songs to itunes is done by other people as well….it is not in Apple’s or the labels interest to make it easy to tons of people to listen conveniently to songs which the like but only buy occasionally.

  • SMASH

    i also was thinking about this… i just dont want pandora to go away…

    i dont like the other sites at all… pandora is amazing

  • Paulo

    Apple doesn’t need Pandora, it can build a system just as good or better.

    Pandora is facing a shut down because it won’t pay artists and rights holders royalties, because it has NO INCOME.

    Last.fm (now owned by CBS) and Apple can afford to, so it’s good for everyone if they both succeed.

    Just because you like Pandora (so do I) does not mean it has a special “right” to succeed – it has to survive in business like everyone else.

  • Zach

    In response to Paulo – Pandora is facing a shut down because an obscure federal panel tripled the rate for internet radio, even though satellite radio pays comparatively less (it’s a percentage of revenue instead of a per-song rate) and terrestrial radio pays zip. Someone who’s into conspiracy theories would argue that the music industry is killing internet radio. It doesn’t make sense to me. But I do know that Pandora’s being shut down because of greed. The reason they can’t pay – they being Pandora and other internet radio stations – is because it’s a relatively new media, and advertising isn’t fully established. A site like Last.fm can survive because it’s owned by CBS, which has deep pockets.

    Pandora actually does have income – about $25 million in revenue, about 70% of which is going to pay off royalties. For other internet stations, it’s more. Satellite’s rate is set at about 9% of revenue. And terrestrial pays nothing. Does that seem right to you?

  • Buck Eldorado

    Why should Apple bail out Pandora’s shareholders? They had the chance to put their money in a sure bet, but instead they chose to invest in a competitor. Now that Pandora’s failed business model is collapsing they want Uncle Steve to give them their money back by buying them out? I don’t think so, Tim. They knew the risk and still backed the wrong side. I hope they lose every last penny. If Pandora’s worth anything to Apple (although I don’t think it is) they can pick it up at the bankruptcy auction for pennies on the dollar.

  • http://www.cyclelogicpress.com Partners in Grime

    Pandora is very cool.

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