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The Market's Most Exciting Company Not Named Apple

If there's anybody to blame for the situation the music industry is in -- slumping sales, uncertainty over how to monetize streaming and royalty payments making only a select few musicians rich -- it's the music industry. The music industrial complex, broadly speaking, sleepwalked into the digital age. It never genuinely or fully embraced it. It didn't come to the table, ahead of the curve, with fresh rules to govern this fundamentally different, dynamic and tech/data-driven assembly of platforms.

And now everybody from the major labels to the big publishers attempt to compensate for their inaction by putting it all on Pandora.

In much the same way Amazon.com (AMZN - Get Report) disrupted retail with its ever-evolving e-commerce ecosystem, Pandora disrupted an industry that attempted to hang on to the past -- broadcast radio. As such, it created a whole new market for consumption catching the music industry off guard.

The industry's solution -- like retail's response to Amazon -- punish Pandora for innovating. Amazon left brick-and-mortar retailers in the dust. Physical retail's answer -- make Amazon collect state sales tax across the country. Similarly the music industry's fix for its own ineptitude is to open an all-out assault, packed with lies and no context, on Pandora. To make the company pay what amount to reparations. To subsidize debt-ridden broadcasters who couldn't afford to pay a performance royalty even if they wanted to.

So, the system does suck. Nobody is disputing that, but it's not Pandora's fault.

The royalty situation -- across delivery mediums -- needs to be taken care of. Pandora will continue to be a part of this discussion. One that hopefully takes place independent of lawsuits, misinformation campaigns and blog posts, nasty or eloquent.

That said, the discussion needs to open up, shifting focus away from the singular issue of royalties. As Westergren explained in his "eloquent" blog post:

Regardless of the math, the truth remains that any way you cut it, when it comes to Internet radio "x spins pays y dollars in performance fees" is always going to sound like a small number. The total is huge and growing (over $250 million last year alone), but the per spin number is small. Which leads me to the next, and perhaps more important point. The value of a spin on Pandora is about much more than royalties. Over 350 labels actively service Pandora with new releases. And we get thousands of unsolicited submissions from artists. Why? Because radio has, and will always be THE primary means of promotion for artists. Spins means audience, and developing an audience of patrons is THE key to long-term sustainability for artists. Furthermore, in an Internet-connected world, the ability of a service like Pandora to activate fans is extraordinary - far beyond anything broadcast radio has ever been able to offer. We have already begun developing and testing those capabilities, and the artists who have participated in these programs have been blown away by the results.

There's no question -- Pandora must do more now to, as Westergren put it, "activate fans." But, before Pandora can act most effectively, the music industry -- the groups presently in attack mode -- need to embrace the reality that we live in different times. Times where the data Pandora collects can be used to promote artists of all flavors and sizes.

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