Pandora is selling about a million songs a month through affiliate links to ITunes and Amazon, according to an article in Techcrunch. About 20% of those million songs are downloaded through their very successful iPhone app, which was the number one most often downloaded iPhone app for 2008. At a buck a piece, Pandora is generating $1million in music downloads a month! (That’s total revenue, not their portion of the sales, which is some share of that.)
Playing with a little hypothetical math, Techcrunch goes on to figure that Pandora is 1% of the streaming radio marketplace. Say all of streaming radio could generate paid song downloads at that rate, making the revenue $1.2 billion a year. Add to that the fact that Pandora says that anyone who buys one song is good for 3 to 5 more. So let’s just multiply that $1.2b by 3 to be conservative. That’s a $3.6 billion dollar a year revenue model. “Why play such a hypothetical?”, says Techcrunch…” Well because the total recorded music industry revenue last year was only $4.6 billion.”
There are a few qualifiers that should be mentioned in this fun little exercise. Such as the fact that Pandora is a music discovery site extraordinaire. They’re exceptionally well designed for music discovery, so it’s a stretch to assume all of streaming radio could inspire as many song purchases.
Another point is that I’m not at all sure they’re just 1% of the streaming radio marketplace. I wouldn’t be surprised at all if their audience size is greater than 1% of the streaming universe, or at least the measured one.
Qualifiers aside, this is a fun exercise in considering the positive impact that streaming radio could have on the music industry. Web and mobile affiliate links on streaming stations, when done in a way that makes it easy for the listener, can be big business. Stations should be working hard to make sure their platform – web and mobile – promotes and optimizes affiliate music sales as an additional revenue stream.