This site is dedicated to new ideas and concepts with regard to Sirius XM Satellite Radio. New technology, marketing ideas, and strategic partnerships are fair game. This site is for brainstorming and I welcome all new ideas.
DISCLOSURE: I own shares of Sirius XM Satellite Radio.

8.22.2008

Pandora's Broken Box

A lot of talk has surrounded Pandora and other online services which allow users to design their own channels. I am a strong believer that this business model is a broken one. Let me explain why.

Satellite radio sends out one signal for a channel and each user receives that signal. Each time a song plays on that channel, a royalty fee is paid. If we assume this channel plays 3 minute songs for 24 hours a day, we would have 480 songs played during the course of the day. Royalties paid for one channel would equal 480 songs regardless of the number of users.

Pandora allows users to configure a channel to play the songs that they want. This means that the same figure above for satellite radio (480 songs/day) applies to each Pandora user. That's right! It is sort of like quicksand. The more users they have, the more expensive it is for them to stay in business.

So what does this all have to do with Sirius XM? I suggested to Sirius XM management that they should allow development of online channels by broadcasters/users. For a higher fee ($300-$500/month), each broadcaster could develop content and broadcast it online to any Sirius XM user. Since this is content on one channel, you are talking about limited royalty fees. The charge should cover all royalty expenses and put a little something into Sirius XM's pocket. Ad content could be provided by the programmer or coordinated with Sirius XM in order to defer the cost of programming.

Sirius could help to promote these very same channels by allowing some of these channels actual satellite broadcast time on special channels from time to time. It helps to legally spread online music service into mainstream use. These channels could be a great promotional tool for the recording industry. Broadcast concerts for local bands to promote themselves. Possibilities are endless.

1 comment:

coolbreeze said...

I totally agree! I recommended that SIRIXM acquire Pandora in order to have access to a solid brand with an enormous fanbase.
I also think that the RIAA should consider a new royalty platform with reduced fees to accommodate and support this scenario. I believe it would be a win/win for artists and content providers