Rdio

Last week it was announced that Rdio would be acquired by Pandora for $75m (after previously raising $125m in earlier venture capital rounds). As part of this deal, Pandora will acquire all of the “technology and intellectual property” from Rdio, and Rdio will be shutting down its subscription service effective November 23. The rumor is that Pandora plans to launch a paid choose-what-you-listen-to streaming service similar to the Spotify/Rdio offering sometime in 2016.

I’m rather saddened by the whole thing. I’ve been a paid Rdio user more or less since it launched, and have gotten a lot of my friends to switch to Rdio. I loved that Rdio focused on having an HTML/Javascript based player from day one. In my opinion Rdio has the best user interface for album-centric music listening, especially with respect to discovering new music. That said, the writing has been on the wall for Rdio for a number of years now, so their recent acquisition announcement didn’t surprise me (if anything I’m surprised it didn’t happen sooner).

What upsets me the most about this is the future we’re headed into. It appears that in not too long the only real major options for streaming albums will be from Spotify, Google, and Apple (and maybe Pandora?). It’s a tough market to compete in because all of the companies are making razor thin margins due to the licensing costs. This means that there’s very little room to differentiate in terms of cost or selection. Ultimately when there’s so little competition it ends up hurting consumers the most.

What makes this situation especially infuriating is that no one really seems to be profiting from it. Consumers have very few options to choose from, and the options they do have are essentially priced the same with the same music selection. The companies offering these services aren’t making that much money, as evidenced by the acquisition of Rdio (at a price lower than what they raised in VC funding). In fact the most recent news I cound find about Spotify’s financials show that Spotify is still operating at a net loss, and their operating loss is increasing with time. The artists aren’t really happy because they make almost no money from streaming services, e.g. as evidenced by Taylor Swift’s recent spat with Spotify. The only actor here who really seems like they might be doing well is the record companies who take in the lion’s share of the subscription payments for these services. Even the record companies aren’t happy though, since revenue from streaming services seems to come at the expense of traditional album sales.

In my opinion the major problem here is that the distribution rights to almost all of the music that consumers want to listen to is owned by only three companies: Universal Music Group, Sony Music Entertainment, and Warner Music Group. Even smaller “indie” labels that maintain artistic control often sign away distribution rights to these companies for practical reasons (e.g. because these distribution deals may be necessary in order to get radio air time). The fact that so few companies own so much of the music we listen to is bad for everyone. In fact, the problem is getting worse: I remember when Napster was first making waves people were talking about the “big five” record labels who were pursuing legal action against Napster, and since then EMI and BMG have been absorbed leaving us with only three major record labels left.

I don’t really see how the current situation can get any better since all signs indicate that ownership of distribution has been getting more centralized not less centralized. Maybe one day anti-monopoly laws will be used to untangle this mess, but that seems far fetched. In the meantime it appears that I’m going to be switching to Google Play Music (until Pandora’s new streaming offer materializes at least), and I’ll continue to hope for a brighter future.