Opening Pandora’s box may aid ailing music industry: Mobile devices could be key to mobile entertainment industry

I spent a little time over the last few days downloading – ahem, purchasing – music.
I bought a few tracks from a punkish-alt country band called Dead Moon, a jazz/funk act dubbed The Quantic Soul Orchestra and a couple of entire albums (do people still call them that?) from Handsome Boy Modeling Club, a loungey hip-hop act.
The genres were disparate, but there was a common thread: I first heard about all these artists on Pandora, and I never would have known about them otherwise. And it’s not like I’m an avid downloader: I buy plenty of tunes online for my 5-year-old daughter – who, thankfully, still prefers ’80s and ’90s alternative to Hannah Montana – but I rarely purchase songs just for me.
If you’re in the mobile space, you’re probably familiar with Pandora. The online startup has built an impressive audience with a site that uses algorithms to create streaming music channels that are fine-tuned to each user’s tastes. Listeners can type in “Kings Of Leon,” for instance, to build a modern rock station, then tweak the service by indicating whether they like each ensuing tune. Pandora’s “Music Genome Project” uses staffers to identify hundreds of qualities such as “minor key tonality” and “subtle use of vocal harmony” to find songs from other artists listeners may appreciate.
Pandora is far from the only site that couples a recommendations engine with a streaming service, of course. My latest favorite is Musicovery, which uses an eye-catching display and a sophisticated, yet simple menu to display “maps” of corresponding songs and artists. Other startups include the wildly popular Last.fm, MyStrands, Mufin and Lala; online retailers iTunes and Amazon MP3 also have integrated music recommendation engines to their storefronts.
And Pandora, like nearly all free streaming sites, uses safeguards designed to play a variety of tunes and prevent users from leaning on it as a personal jukebox that plays whatever a user picks. Songs can’t be repeated – only paused – and no tune can be played on demand. Listeners can fast-forward through only so many songs in a certain time frame, and the service does a pretty good job of rotating tunes and artists. Just as importantly, all the services I’ve seen make it extremely easy to buy songs from well-known online retailers.
The usage limitations notwithstanding, Pandora has seen remarkable success through Apple’s App Store since releasing iPhone- and iPod Touch-compatible versions last year. The mobile offering notched its 2 millionth user in December, according to Pandora, making it the most-downloaded free app through the storefront in 2008.
Further, Pandora is wisely expanding it mobile presence with a new offering for Windows Mobile phones.
Following the money
So while full-track mobile music services continue to tread water, Pandora is building impressive reach in wireless – and it’s doing it by exposing listeners to music they might actually buy, not just stuff they already own. But record labels continue to try to monetize Pandora instead of actually leveraging it as a marketing tool to sell music and promote lesser-known bands.
Pandora, which last year said onerous royalty fees threatened its very existence, recently began adding 15-second commercials in an effort to drum up revenue. And free streaming services in general got a bit of good news last week when the U.S. Copyright Royalty Board set a floor that represents the least that a streaming service could possibly pay the labels.
But much remains unclear in the wake of the recent ruling, and it appears Pandora and its brethren have yet to build a solid business model. Helping them build that model isn’t the job of the record labels, of course, but there’s an untapped synergy between the two: mobile phones are becoming the go-to device for music on the go, just like transistor radios of a few decades ago. And it wasn’t that long ago that those little radios did much of the heavy lifting for the music industry, exposing on-the-go music lovers to new bands and tunes.
It’s true that music retailing has changed forever, and that file-sharing (read: stealing) represents the vast majority of downloads, and that music will never again be the scarcity is once was. Mobile phones, though, have both the reach and the functionality to be modern marketing channels for digital entertainment, generating sales that otherwise wouldn’t occur. But only if the record labels quit viewing them as virtual retail sales counters and instead embrace them as a way to showcase their stuff to music lovers.