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Comment by noonespecial | Hacker News Reader

Two things to always remember about this debate.

1) Pandora's biggest cost by ridiculously far is royalty payments.

2) Pandora is not now and has never been profitable.

Lots of stuff is broken to make this so, but it's not a case of big bad "piratey" Pandora ripping off poor defenseless artists and laughing all the way to the bank.

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Just to add to what noonespecial says:

1. Royalty rates increase every 3-4 years. This is one of the big reasons why companies like Netflix have a hard time retaining contracts with content owners.

2. There are many middlemen involved in the online music/movie business. By the time everyone gets a cut, there is not much left in pool. This also ensures that everyone gets a very tiny portion.

The online media industry is a complicated mess, and I don't see any long-term solution to it coming up soon.

It's easy to not be profitable, though. Just pay large-enough salaries or invest in future growth what otherwise would've been profit.

In 2011, Pandora paid over 50% of revenues in performance royalties. 50%. Of Revenues.

I don't understand why that is a crazy number. Pandora exists 100% to distribute music...50% of revenues to musicians seems reasonable to me...maybe even low. Apple for example runs their stores at a slight profit while paying 70% of revenues to creators.

That's a much more telling stat.

Not really - it just means they aren't very efficient at monetizing music. Why should artists subsidize a channel that devalues their art?

They shouldn't of course. The point being made was that Pandora isn't laughing all the way to the bank.

That's true. The basic problem does seem to be that people love music enough to have paid a reasonable amount for it in the past, but now have been conditioned to believe that it is cheaper than it really is.

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