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Pandora Could Die If It Doesn't Start Listening

Stocks in this article: P AAPL LVY

NEW YORK ( TheStreet) -- Pandora (P) has no choice but to aggressively shift the prevailing discussion surrounding Internet radio. Shift it away from royalties.

It's not that royalties aren't important. They are. But they're merely part of what should be -- but, at least in the broad public sphere of dichotomous debate, isn't -- a much larger discussion.

Pandora does not dominate the conversation on royalties. It probably never will. Right or wrong, win or lose (as much as I hate succumbing to the dichotomy) Pandora cannot risk staking its future on an emotionally-charged debate that takes on the worst characteristics of bad political theatre.

Save a couple exceptions, I agree with the moves Pandora has made in the royalty fight. I don't blame the company for being aggressive; however, it must do better now. That means distancing itself -- at least publicly -- as much as it can from a black and white argument that turns, in some parts, vicious.

it's a useful dream that makes quite an entertaining show and not much more/up against and for, either/or
-- Elliott Smith, "Either/Or"

It's going to be difficult to overcome level-headedness such as this from Pink Floyd in a Monday morning USA Today OpEd where band members take Pandora to task for how it fights the royalty fight:

We're not saying that the music business is perfect or that there is no room to compromise. Artists would gladly work with Pandora to end AM/FM's radio exemption from paying any musician royalties - a loophole that hurts artists and digital radio alike.
Other changes and compromises may be possible as well. The open letter to Pandora that we signed last year said, "Lets work this out as partners" and that's what we should do. But tricking artists into signing a confusing petition without explaining what they are really being asked to support only poisons the well.

That's what I have been calling for -- collaboration outside of open letters, lobbying, lawsuits, motions and strategic legal loopholes. Sit down at the table and work out sane, logical and sustainable deals. Force positive change in the tenor of the conversation.

Pandora makes an unconvincing argument when it says lower royalties will urge more players to enter Internet radio, thereby increasing airplay and exposure for bands. That may or may not happen, but it's a tough point to push in an era where company after company -- big and small -- enters the space under the present digital royalty schemes.

The worst part of it all -- and I have voiced this opinion directly to the company -- Pandora does not have to take one route, the contentious route. It can't possibly prove that lower royalties will result in a larger pie of digital royalties, but it can prove to the music industry -- like nobody ever has before -- what a great partner it is and can be.

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