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Pandora, Sirius and Spotify Should Check Into Hotels

Turn on the television and it doesn't get a whole lot better. This branch of the Starwood (HOT) hotel network is contracted to Sonifi, a hotel entertainment group formed when investment firm Colony Capital dumped $70 million into once-bankrupt LodgeNet earlier this year. Sonifi just laid off 70 staffers at its Sioux Falls, S.D., headquarters in October and one glimpse at their offerings eliminates any mystery surrounding that move. Their service consists of a loud, wonky pay-per-view interface, a modest menu of channels that doesn't allow scrolling and blacks out big-ticket items like ESPN  (DIS) and TNTHD (TWX) altogether and has no discernible music option.

This Sonifi is a company learning the hard way that hotel guests are enjoying their stay in spite of its service, not because of it. As The New York Times unearthed after LodgeNet emerged from bankruptcy earlier this year, the number of hotel rooms it served globally dropped to 1.5 million in 2011 from 2 million in 2009. Its $421.3 million in sales two years ago was a 21% drop from a high of $533.9 million in 2008.

One look in the room surrounding Sonifi's sponsored televisions indicates why. Free wi-fi, while still not strong enough in many cases to support a hotel full of streaming video viewers, is ubiquitous. Starwood, meanwhile, has taken to either providing third-party device docks for its clock radios or installing docked radios itself. Not only does it not directly acknowledge video or audio streaming, it's seemingly unaware of how to make either of those services work for it in the way that Sonifi's outdated, dying model is.

Right now, Sonifi installs and maintains free televisions and shills video-on-demand options for fees that it splits with hotels. That approach is still lucrative enough to give Sonifi a hose of competitors including Salt Lake City's iBahn, Calgary's Guest-Tek and Broomfield, Colo.-based Roomlinx.

Each of them appears to realize that this approach isn't sustainable when guest are increasingly leaving the TV off and firing up their laptops or tablets to watch streaming content they're already paying for. When your Netflix (NFLX), iTunes (AAPL), Amazon (AMZN) or RedBox Instant (OUTR) libraries make the in-room lineup look like the pre-streaming leftovers at grandma's house, it's time to catch up.

Hotel execs say they get it, but they don't. Marriott (MAR) talks about bumping up bandwidth and somehow offering access to Netflix and YouTube (GOOG), but doesn't seem to have a plan to make it work. Hilton is talking about a per-program fee for such content -- yes, every YouTube short or Netflix show you watch would clock in at $2 to $5 -- while Starwood is playing around with Apple TV at its Aloft hotel in Apple's backyard of Cupertino, Calif.

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