I don't think the article discusses how royalties were paid for traditional radio, does it?
Anyway, I've definitely discovered multiple bands through Pandora, and then bought their albums/seen them in concert/etc.
Anyway, I've definitely discovered multiple bands through Pandora, and then bought their albums/seen them in concert/etc.
5,000 plays on Spotify or Pandora is not equal to a single play on terrestrial radio. A single play on terrestrial radio probably reaches closer to 10,000 listeners, depending on how large the market is. In other words, 5,000 plays on Spotify is less than a single play on terrestrial radio.
Pandora and Spotify are being fleeced by comparison.
With the shift to Internet / satellite, the licensing companies made a huge land grab on the fees. The radio business has a few large organizations that go to bat for the whole industry. They're old lobbying groups with quite a bit of leverage, having been entrenched in DC for decades, and it's one of the reasons licensing fees have remained reasonable for radio. Internet radio / streaming has no such lobbying groups (yet).
In the streaming market you have very few good choices, the market is serviced by a few massive companies providing a very wide selection of music.
In the radio market that same concept is accomplished by over 6,000 commercial FM radio stations, with a diverse playlist. To get a different playlist, you change stations. Indeed every type of music is covered by those 6,000 stations. And of course it used to be even more diverse, in the days of the purely live DJ, before the radio business began to fade and broadcasters cut expenses by moving to networked systems like the former Westwood One.
You also used to be able to call up just about any station and make a song request. I'm sure you won't like that comparison to picking a song digitally, but it's the same, and it was very archaic, but no different than some of the other technological leaps we've made in which old technology seems very embarrassingly primitive. You often had to use a phone to make those requests, and a phone was a marvel in its day.
The technological difference can be compared, in regards to distribution, ease of access, etc. In that case, Spotify / Pandora win, that's obvious. It's not that you couldn't access every type of music via radio stations, it's that it was a lot less practical. Technology leaped forward and vastly improved the situation.
Spotify is very easy to compare against the radio business. What they've done is consolidate the radio market down into one platform. The Internet ate the broadcaster, very simply, just like it ate old Ma Bell. I can also compare IP telephony against the old telephony system.
In contrast, Pandora is much closer to radio in how people approach it. (You can use Spotify like that too, but at least among my friends its not the primary means of interaction.)
You can't compare on-demand services to radio.
Spotify is very different, of course, and that's why they have a different royalty structure.
I own radio stations and I have insight into the fees paid by radio stations for licensing.
And of course I can compare them.