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Comment by sabat | Hacker News Reader

only allowed to live so the labels can suck investors' money through them

That's true, but not as true as you might suspect. Pandora is profitable. Yes, they are certainly pumping a large amount of money to the record labels, but they're able to exist without driving their users away with over-advertising.

I wouldn't do a (label) music-based startup today, though. Sad.

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I don't know the details of Pandora's finances, but present profits tend not to be the whole story here. Many if not most of the startups that have deals with labels also have large debts to them. Plus the labels can change their terms. So you pretty much live on sufferance, for as long as you're useful to them.

AFAIK, Pandora is classed as radio, and doesn't have to do direct deals with the labels. They pay royalties to SoundExchange, which in theory distributes the royalties to the content owners. The rates they pay are a lot lower than the rates companies like Rdio, Spotify, and MOG have to pay to the labels directly for on demand streaming rights.

Pandora has been close to shutting down a number of times:

* http://blog.pandora.com/pandora/archives/2007/03/riaas-new-r...

* http://www.washingtonpost.com/wp-dyn/content/article/2008/08...

they are at the mercy of the labels.

Absolutely true. I was making the point that they've survived and are apparently thriving. However: Pandora and similar services have had to work far too hard to do such a straightforward thing.

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