Bob Lefsetz is a music industry observer, and publisher of the Lefsetz letter:


This is all about name-recognition. Investors are stupid. They know little about the products of the companies they lay their dollars down for. They’re acting on buzz.

And buzz has nothing to do with profits. Certainly not long term.

What we’ve got here is a phenomenal job of brand-building. Tim Westergren, like a carnival barker went out and sold a service based on a combination of hucksterism and I’m on your side duplicity. If Mr. Westergren truly cared about music, he’d be a manager. I haven’t seen someone this dedicated to building something from zero to superstar status in eons. But there’s too little money actually promoting music, building stars, and talent talks back, digits do not.

In other words, it’s really damn hard to nurture and break talent.

It’s much easier to build upon the hard work of others. Which is why record labels/rights holders demand so much from Pandora, after all, it’s built upon the equity they’ve created, without the music, Pandora is nothing.

Analysts have noted this. Pandora’s lack of scalability, its huge rights payments.

But what analysts have not drilled down upon is the service itself.

It just doesn’t work.

People become infatuated with new technology. They love to check things out and tell others about them. Isn’t that the key to making a YouTube clip go viral? But just because you’ve got millions of views that does not mean you’re rich. Or that you can replicate your success. It just means that for a moment everybody got excited about you.

For a moment, everybody got excited about Pandora. It was so easy to use. But did it satiate? Was it satisfying?

If music radio is to survive, and that’s doubtful, it’s all about curation. Serving up music you want to hear. Pandora fails at this. Despite the vaunted Genome, just too many suggestions are tuneouts, some positively dumbfounding. Do you really expect people to sit for this, pay for it with their cash or time in a world where people only want the best and have no time to waste?

In other words, the future of listening to music, of breaking acts, of exhibition, is not Pandora.

Slacker does a far better job of curation, because it’s done by human beings. But Slacker doesn’t have a Westergren, almost no one knows the company.

But Slacker doesn’t satisfy either. You’re interested in what they air but you constantly want to hit the button to see what’s next. You’re interested in the list more than actually listening!

Investors expect that in the future people will pay to listen to crap. Huh?

The future of music exhibition does not revolve around algorithms but people. It’s about personalities, cults, built around the deejay. Which is why all radio research is flawed. Radio is not about the tracks as much as the trust. Is the deejay my friend? We hang with imperfect friends, we’ll listen to a song on their recommendation that we may not initially like because we like THEM! We don’t really like Pandora. There’s nothing there other than a bunch of wanna get rich suits.

Just like there were MP3 players before iPods, the future of an ad-supported streaming music service, or even a paid subscription service, is not Pandora, but something after, something later, something further down the development curve.

We see this all the time. Techies were communicating online for years before AOL made it easy and desirable for the general public to get involved.

Windows 3.0 was a vast improvement over MS-DOS, but it wasn’t until Windows 95 was released that computer acquisition by the public went nuclear.

Hell, disc burning was all the rage eleven years ago, but the trend was brief, it was eclipsed by the iPod.

I’d love to tell you Pandora is a great service. Aren’t we all looking for someone to turn us on to new music? But every time I use it I’m frustrated that its suggestions aren’t better. As for those testifying about it, I just put their opinions in the pile of the ignorant. No one ever e-mails me about Pandora who has tried Slacker. Pandora users are not usually SiriusXM subscribers. What we’ve got here is a huge set of clueless adopters who will jump rather quickly to the next best solution. Which is coming.

I mean isn’t Pandora just a list? And I can use that same list to check out tracks on Spotify or Rhapsody or MOG or…

But everybody gets caught up in the mania. No one wants to investigate and learn the truth, someone pointing out flaws is accused of being a downer, a naysayer, someone who doesn’t believe in the future.

But that doesn’t make the enthusiasts right.

And just because there’s a blockbuster IPO that doesn’t mean the company has a future.

P.S. I do believe adding comedy to Pandora was a brilliant move. But they haven’t marketed this feature well.

P.P.S. If you really want to know what’s going on with Pandora, follow the tweets of David Heinemeier Hansson, creator of Ruby On Rails and best-selling co-author of “Rework”. Hansson is the antithesis of Wall Street. He’s about building businesses that make money from day one, he’s about PROFIT! What a concept! All we’ve got is these corporations losing money making their executives rich. Like Live Nation and Warner. Come on, there are no miracles here. Occasionally companies turn the corner but why can’t these companies make money now? Why can’t Live Nation balance the books and pay its execs less and make money today? Or at least say the loss is about investment in Ticketmaster, in the future. Same deal with Warner Music. If you can’t make money running it, maybe you’re not so smart, or maybe you’re just a crook, or maybe it’s just a bad business. If it’s your own private company, do what you want. But if your company is public, you’ve got a fiduciary duty to
investors But no one believes in the law anymore. Not Goldman Sachs, not the second rate banks. Everybody just wants to get rich. From Westergren to the venture capitalists to the wannabe artists. And that’s much easier to do than to make a great record, to make a truly great product. Pandora is all about subterfuge, the same way labels sell generic music. Get everyone excited, put down naysayers, get the mainstream to hype you and sell. But that stuff is almost always crap. Just like Pandora.

Follow Hansson on Twitter here:!/dhh

Or you can go to his homepage where he posts his most recent tweets:

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Category: Music, Technology, Think Tank

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

10 Responses to “Pandora IPO”

  1. CTMike says:

    Wow. I am in no way qualified to opine on Pandora’s IPO or its viability as a company/stock, but I enjoy the service itself (Pandora and the NYT crossword are the only two things on the internet I actually pay for on a month-to-month basis). Based on this post I just signed up for Slacker to see if it is really that much better.

    I do have to say Google Music is pretty sweet so far.

  2. phb says:

    Don’t know beans about the scability of Pandora and frankly could care less. However, I do use the service 3 or 4 times/week and listen to the ads when they play. I like the simplicity of picking a few artists and poof, instant personalized station. I’m thinking Pandora may do better than expected above or “Heard on the Street”

  3. MikeNYC says:

    Pandora as a service does not suck nearly as much as the author states. I made a “Neko Case” station the other day and could not stop listening for days. Heard lots of great stuff I didn’t know about and some I did. “Tom Waits” station was tremendous. “Loyd Cole” station served some real crap (+ some Loyd Cole.) Win some and lose some. I don’t follow it regularly, but I though I heard a major tweak went into effect a while ago and I thought I noticed the stations got better.

    Hadn’t tried Comedy and thanks to the author for that reco. I will.

    I don’t use it all the time. But sometimes it’s a cool way to hear new (to me) stuff and some I know mixed in.

    The business model may suck and keep losing money, the stock may be a stupid investment and may tank, but the service absolutely, without a doubt, does not suck.

  4. mblank says:

    I listen to Pandora at work daily. Still hear the commercials but never have clicked through (on purpose). Another service I’ve been enjoying with friends is I see that as a more social Pandora, but they’re still ironing out some bugs.

  5. whit says:

    What you get out of Pandora depends on what you seed it with. The trick to get outstanding tracks is to seed it with obscure, brilliant stuff. Start on the outside, and yes, it will spiral in towards normalcy. But it will still be far better than any of the SiriusXM channels, which I also listen to for variety and scope. It’s also got better fidelity than SiriusXM – no small advantage.

    But if you seed Pandora with stupid, common music, yeah what you get back sucks as bad as commercial radio. So what? At lease people using it that way aren’t sending revenue to Clear Channel. And I can’t really see why it won’t put a lot of Clear Channel’s stations out of business. They don’t quite have DJs either. I’m not about to invest in Pandora, but all-in-all it’s a good thing with solid profit potential.

  6. lunartop says:

    What concerns me about all these streaming services is whether bandwidth limits will ultimately limit their growth. In my experience (certainly in the mobile arena) companies are increasingly restricting their bandwidth offerings.

  7. lumpy oatmeal says:

    I have the Rhapsody $10 a month all-you-can-listen-to deal, and I’ve been very happy with that. Listen to whatever I want, whenever I want, that’s been the best deal for me. Their radio station feature, I think, is better than Pandora’s. Much more variety in their stations compared to Pandora. It sounds like Pandora might be limited in what they can play on those stations, I’m not sure. In any case, I’ll pay money for a good service.

  8. Carl C says:

    Wow, I couldn’t disagree more with what this guy has to say about the “quality” of Pandora’s service.

    Just this afternoon, I was sitting in traffic, trying to find something good to listen to, and thinking “I wish I could get Pandora in my car…” Listening to traditional radio is like using a corded phone – it just seems needlessly restrictive.

    But, Pandora has a hard fight ahead, and I’m not convinced it will survive. Obviously, the music industry is not happy with this “new-fangled” technology giving me so much satisfaction for such a low price…

  9. [...] Lefsetz chimes in at the always good Big Picture with a long piece that is worth reading, showing that you can write about such an event without cheerleading about the gold rush: This is [...]

  10. [...] Others blame the hype surrounding Internet companies, the second so-called “tech bubble.” Pandora, while it is extremely popular, has its share of shortcomings. [...]