Pandora Media
Pandora Sidebar: Is Music in Turnaround Mode?
Digital music services like Pandora are sparking new growth.
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SHUTTERSTOCK (ART)
For the first time in seven years, the music business is growing. And at least a few people give some of the credit to digital music services like Pandora Media Inc. (NYSE: P).
“The business is starting to turn around because of recommendation engines like Pandora and the fact that there’s a ‘Buy’ button right there,” says Tom Silverman, founder and CEO of independent record company Tommy Boy Entertainment LLC, whose stable of artists has included De La Soul, Coolio and The Cliks.
The trend is not simply an increase but rather a reversal of the sales decline in recent years. Overall music revenues jumped 8.5 percent in the first half of 2011, while digital track sales rose 11 percent, according to Nielsen Holdings NV (NYSE: NLSN) and Billboard’s Mid-Year Music Industry Report.
One advantage for artists in general, says Silverman, who is also on the board of the performance-rights agency SoundExchange, is that personalized streaming services don’t put a single artist in heavy rotation or give just the Top 40 the majority of airplay, as is done by traditional radio stations, where a few major artists can dominate. He also believes that Pandora’s Music Genome works for a lot of listeners. “I don’t know anybody who doesn’t like Pandora,” says Silverman. “They even cover a rare subgenre of doo-wop that I like, which is pretty impressive.”Another factor driving sales, Silverman believes, is the fact that the “Buy” button on some online music services has made it easier for fans to purchase tunes rather than illegally download them. In fact, Silverman says, Pandora is now one of the top three sources of sales referrals for iTunes. So rather than displacing revenues, online services may be actually enhancing sales.
“Digital broadcast still accounts for only about 5 percent of listeners, but it’s generating $365 million a year for artists and rights owners” in royalties, says Silverman. That’s income performers don’t receive from traditional radio stations in America, so from the perspective of the performers, it’s a positive note.
