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Pandora's Absolutely Not Screwed; It's In the Driver's Seat

But, more importantly, the misinformed view Pandora as little more than a "jukebox." They simplify the company's story to one centered on the size and type of royalty payments it incurs. They fail to understand that a few smart guys founded Pandora and hired a bunch of other smart people, including outgoing CEO Joe Kennedy. This is not a passive bunch, waiting for Congress to decide its fate. Other avenues for revenue exist and will be nurtured (see, for example, this video I did from The Sunset Strip in West Hollywood) no matter what takes place with the legislative process.


Greg Sandoval of The Verge wrote a nice piece -- Biting the hand that feeds you: Why are record labels fighting Pandora? -- where he articulates what Pandora means beyond merely spinning records:

For the record companies, it's like walking a tightrope. They must balance their desire to maximize profits while they avoid killing the new revenue stream in its infancy. If access models fail, the labels risk ending up back in a world where a single player like Apple holds all the power

In other words, the music industry needs Pandora just as bad as -- or, dare I say, worse than -- Pandora needs them. Same goes for the rest of Internet radio.

Sandoval continues:

Battling Pandora will be tricky for the music sector. Multiple music industry insiders have told The Verge that the labels consider Pandora a capable and communicative partner. Then there's the money. According to the RIAA (The Recording Industry Association of America) report and statements made by SoundExchange, the group that collects royalties from web radio services, Pandora contributes about 25 percent of all the money the labels receive from the access models. (Incidentally, SoundExchange's revenue was up 58 percent last year.) But this is precisely why the RIAA won't budge on the rates. Sources say that the labels believe web radio is bigger than Pandora and the market will expand soon. Apple is coming.

Simply put, more competition, as Pandora has argued all along, is a good thing. It's good for Pandora because, with more Internet radio players, rates will likely come down. And it's good for musicians because, even if rates do come down, there will be that many more outlets playing their songs.

So, no, Pandora absolutely is not screwed. It's positioned in the driver's seat to a much greater extent than most observers give it credit for.

--Written by Rocco Pendola in Santa Monica, Calif.

Stock quotes in this article: P, AAPL 
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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