Harvard Business Publishing

What frustrates me about The Saga is that I can't tell how genuine the panic is. That is, is this a Chicken Little song-and-dance? Or are they genuinely on the ropes? I love Pandora. Apart from MP3s on my computer, it's my only source for music. I think they've built something that's absolutely brilliant. And I agree, that I think usurious royalty rates are a real problem. But are they really about to go out of business?

As a worst-case scenario, they could easily convert to a freemium model. They've already got it in place, with their $36/year subscription fee. They just aren't pushing the subscription as heavily as they could. Even as it is, when you find the "subscribe" button, as it's describing it to you, the highlighted button choice is "keep listening to Pandora for free." I'm guessing their conversion ratios are terrible.

Or, in line with their grassroots appeal, they could go with a more open, "sweat-equity" model, like this:
• As the first song of every user's hour-long block, have them listen to a song that's still "under consideration." The user checks off one of the hundreds of appropriate descriptors: "male vocal"; "female vocal"; "shared male and female vocals"; "no vocals".
• As the song is reviewed by more and more users, it build up a stable tag cloud, with outliers discarded automatically.
• After a certain number of reviews, the song enters rotation, using the user-generated tags as the datapoints for the Pandora algorithm. With the volume of users Pandora has, I can't imagine it would take more than three or four hours per song, and there could be hundreds (thousands?) of songs being processed and added to the database daily.
• If money troubles continue to plague Pandora, they could limit the songs in the user-generated queue to songs from non-RIAA labels, or from bands that are more interested in exposure than in royalties.

That's not necessarily THE idea that's going to solve their problem. But it points to the fact that Pandora has options in front of them.

To reiterate: I love Pandora, and would hate to see them go under. Furthermore, I think the RIAA is approaching this in a terribly hamfisted, illogical, and self-destructive way. But I also think that if Pandora throws in the towel after this without trying other things to generate revenues, they're doing *everyone* a disservice.

Good comments Charlie. Hard to know exactly how low on the ropes they are - only they know that. From the history (see the Inc. article) it's clear they've been on thin ice several times in the last few years. How much longer than can hang on is only known by them. I'd like to see a counter article on the last.fm story - I know much less about what they've done and how they're going to manage the same challenge.