April 02, 2009

Pandora And Micro-Channels

You might be familiar with Pandora, the streaming online music service? You list a half-dozen of your favorite artists, and then "the algorithm" streams you a series of songs that you, in theory, will enjoy listening to.

I have 1.5mbps DSL service, not anywhere near as fast as cable, but fast enough for me to get streaming Netflix movies via my Roku player, and more than fast enough to handle Pandora. I listen to Pandora through my Grace Wireless Internet Radio ($176 with free two-day shipping at Amazon), and I set up all of my NPR podcasts through this player as well.

Why the two-paragraph description of my viewing and listening habits?


Once you head down a path that is both convenient and more entertaining than a prior channel, you become less likely to go back.

There's no reason to listen to 103.7 FM (The Mountain) and endure twenty minutes of commercials and a half-dozen songs that I'm not interested in when Pandora delivers most of what I want, for free.

Once again, a profitable channel (radio) is replaced by a popular (to me) channel that is hard to monetize (Pandora).

And there's no way that 103.7 FM (The Mountain) can fight their way back into my life under the confines of the current business model. They can move their channel online, streaming what you hear on the radio. They can add "HD" stations, truly becoming "multi-channel". But the core premise of the brand is to sell twenty minutes of advertising, per hour, every hour, and to get me to listen to the advertising. That worked when music was scarce.

The problem for my preferred micro-channel combination (Pandora + Grace Wireless Internet Radio) is that maybe a few hundred thousand people (at most) prefer this combination. This combination, while futuristic, does not represent the future.

That's the challenge that we, the "multichannel generation", are facing. Somehow we were all smart enough to jump on the internet bandwagon a dozen years ago --- we could see that e-commerce was going to be important. Today, it's a lot harder to see the future. We simply cannot point to the "next big thing". We probably need to experiment in a hundred or a thousand micro-channels. But because none of it scales, we don't experiment, hastening our current trajectory.

The next generation of merchandising and business leaders will solve this problem. Oh, the opportunity!


  1. Kevin, this observation was very interesting to me. Do you believe that one would literally have to examine each micro channel to see which would have the most impact while also being profitable?

  2. You're touching on one of the core points from Anderson's "Long-Tail," that behavior will gravitate towards content that is more niche and relevant to consumers.

    And you're right, no one will go back to the old (and profitable) stuff.

    But I do not think that scale will be an issue. It's bad for the huge companies that cannot hyper-target efficiently. A small firm, however, sees it exactly fitting your habits. That is, Pandora + grace wireless is a golden egg.

  3. Chris --- Maybe not every micro-channel, but the micro-channels that comprise, say, 80% or 90% of the sales need to be analyzed!

    Matthew --- As you mention, scale is relative. For me, I can write this blog, the blog sells projects, and the projects pay my bills. For a $100,000,000 business, like one of my clients, nothing scales, and as a consequence, this stuff becomes a huge problem. For a business like Amazon, a reversal happens, and all of this stuff scales in total.


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