Pandora Crashes, But Is It Dead?

Music labels want Pandora to charge a subscription fee and enter direct licensing agreements. Of course that's what they want because that puts more money in the music industry's pocket and less in most artists' bank accounts. Plus, it makes Internet radio an impossible business.

Stress this: The ONLY way forward is a compulsory license scheme where, across platforms, everybody pays something close to the same amount. One company cannot continue to pay 7% of royalties, another 15% and another 55%. It's just absurd.

That's the answer. Moving to a subscription-based model like Spotify is absolutely not the answer. It would be a disaster for everyone -- the business and the consumer.

You cannot scale a subscription model like Pandora has scaled and continues to scale the free model. Spotify proves that. Look at how much it has spent, yet it has barely made a dent in the U.S. market. Without scale, you can't sell advertising; without advertising, you don't have a business.

Pandora has scale at 59 million active listeners in the U.S. only. Spotify has no scale at 15 million listeners worldwide.

We're approaching pivotal times in what comes down to a battle between compulsory versus direct licensing and a war of two different world views.

Ultimately, as Pandora's market share continues to grow, traditional radio's footprint gets smaller and Spotify's deficiencies go public (that love affair is about to end), Pandora -- not the music industry, not disingenuous Clear Channel and surely not Spotify -- has the edge.

The labels will not win this fight. Pandora's on the right side. As its popularity grows, so does its leverage. As Pandora makes its case in Congress and people such as myself spend weekends writing about the issue, that will become clear.

Interesting stuff to talk about. Fascinating actually. But, with relation to the stock, it's even noise. At least right now.

The stock stinks unless you trade it nimbly or really love it and salivate at "cheap" shares. I would not touch it until Pandora retakes control of the royalty conversation in Washington.

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