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Spotify Will Die an Expensive and Embarrassing Death

Stocks in this article: AAPL P

Earlier this year, Patrick Carney of The Black Keys said this about Napster founder Sean Parker, Spotify board member and investor, in response to Parker's absurd claim that Spotify would make more money for the music industry than iTunes:

Because he's Parker an a**hole. That guy has $2 billion that he made from figuring out ways to steal royalties from artists, and that's the bottom line. You can't really trust anybody like that. The idea of a streaming service, like Netflix for music, I'm totally not against it. It's just we won't put all of our music on it until there are enough subscribers for it to make sense. ( HuffPo, 3/28/2012)

Carney was pretty much on the mark; however, he got the part about "a streaming service" being "like Netflix (NFLX)" slightly wrong.

I need a whole 'nother article to give a Spotify/Pandora/Netflix comparison proper treatment. And I will write that article -- a Part 2 if you will -- later this week on TheStreet.

But, for now, let's just say:

  • Spotify gets all of the good press. Pandora gets all of the bad press (Some of it, recently, from me).
  • Spotify gets credited with being able to revive the music industry. Apple already did that. Pandora continues to, but, more importantly, it is redefining radio, something neither Spotify or Apple will be able to do.
  • Record labels love Spotify. They hate Pandora. Musicians such as Carney hate Spotify, and for good reason. They should love Pandora. I'll explore the reasons why later this week when I clear up misconceptions about the different music royalty structures Pandora and Spotify live by, using the well-known Netflix model to make sense of it all.
  • Timestamp this. And consider it a preview of Part Two: A Spotify IPO will make the Facebook (FB) and Pandora IPOs look like smashing success stories.

    Keep tabs on my articles as they publish here and Follow me on Twitter as well as Google Plus +.

    This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

    Rocco Pendola is TheStreet's Director of Social Media. Pendola's daily contributions to TheStreet frequently appear on CNBC and at various top online properties, such as Forbes.
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