Pandora’s acquisition of Ticketfly offers exciting new possibilities for artists and managers. Rightsholders and on-demand services however, have fewer reasons to be cheerful about it, David Balfour suggests

09 October 2015 - Editorial

Songkick founder Ian Hogarth published a fascinating article for TechCrunch on what he calls ‘Full Stack Music’ at the start of this week. In this think-piece, Hogarth predicted and encouraged the development of a world where the traditional music industry divisions between radio, on-demand music and concert ticketing should be broken down. He suggested that greater synergy between these sectors was not only logical, but would “produce a richer experience for artists and fans, unlock a ton of additional subscription, ticketing and advertising revenue for artists and create a better experience for fans.” 

Hogarth’s piece, which quickly attracted widespread praise, suggested that “over the next few years we will see this connection between streaming and ticket sales become completely explicit.” We suspect even he wasn’t therefore expecting that just two days later, the biggest online radio service, Pandora, would announce a half billion dollar deal to acquire the ticketing service Ticketfly – turning Hogarth’s suggestions into a very powerful reality. 

The synergies between services like Pandora and Ticketfly could hardly be clearer. Ticketfly targets US venues with fewer than 7,000 capacity, where around 75% of US ticket sales are made, but where up to $1bn of tickets also currently go unsold every year. Pandora meanwhile services 80m monthly listeners on a technology-based platform that is able to assess where those users are located, and what kind of music they like. For Pandora to be able to accurately target concert tickets to individual music fans is a powerful proposition – and could help mop up a significant amount of the currently-unsold ticket inventory.

It’s important to note that a range of streaming services have been engaged with live music data for some time. Hogarth’s own Songkick platform is integrated with Deezer, SoundCloud, Spotify and YouTube. Rival services such as Bandsintown also have significant integration with streaming platforms and routinely target concert recommendations at users. What makes Pandora’s deal a significant step beyond these experiments however is the fact that it will be able not just to promote concerts, but sell the tickets direct on its service without having to send users off-platform. 

The Ticketfly integration into Pandora is likely to be a very good thing for artists and managers. They are now able to benefit from the massive Pandora audience in a way which direct benefits their businesses. We’re yet to spot a downside to this new partnership for artists whose income is heavily dependent on live income and ticket sales. It’s also a good thing for Pandora users. They’re used to being targeted with ads, yet now they’re likely to receive ads which acknowledge their fandom and which actually help them to develop a deeper relationship with artists, rather than just trying to sell them random products. 

For Pandora, the acquisition seems intelligent and market-leading. Questions are certainly being asked, however, about the half billion dollars that it’s paying for Ticketfly. Analysts have suggested that this price tag values the company at around eight times revenue, which makes profitability of the acquisition dependent on significant growth in the existing Ticketfly business. Doubts around Pandora’s ability to make this happen led to a 4.5% decline in its share price the day after the acquisition was announced. Nevertheless, it’s clear that Pandora’s reach and audience targeting abilities give Ticketfly powerful new tools to grow its audience and hopefully mop up a significant amount of the currently-unsold ticketing inventory. The figures are tough, but the basic strategy behind the acquisition sounds like a good one, with plenty of growth potential.

Pandora is also answering some wider questions with this acquisition. The service has been constantly beset by complaints from artists, songwriters, record companies and publishers about the royalties it pays on its streaming service. A good many tech companies face similar pressures. Pandora has been intelligent enough to realise however that if you can get the actual artists on-side, a truly significant battle is won in terms of the wider conflicts. Arguing with artists makes services look bad, arguing with companies, less so.

Those working in the recorded music industry, or for on-demand streaming services, arguably have far fewer reasons to be cheerful about this new partnership. It’s almost certainly not going to lead to an increase in royalties for the use of music coming from Pandora’s streaming service. It’s also going to make Pandora’s free service look even more appealing to fans, at the expense of better monetised and more industry-friendly rivals. It could also lead to a new climate where artists and managers are prepared to defend Pandora’s position in their overall ecosystem in a way that they never would have done so before this live piece was added. So, what’s undoubtedly a smart strategic move for Pandora is also potentially a pretty threatening one for those who income is centred on recorded music use.

It’s frustrating that a more connected ecosystem which benefits fans and artists in this case seems to leave many rightsholders out in the cold, whilst simultaneously weakening their negotiating position. Could it potentially lead to renewed pressure from labels to take a stake in artists’ live income? Or is it possible for such improvements to lead to benefits felt more widely across the industry? Hogarth made some more encouraging suggestions around this idea in his piece. Perhaps streaming subscribers could be incentivised with lower booking fees, for example? Or ticket buyers could secure time-limited premium access to streaming services, encouraging them to enter the paid sphere? There are more complex synergies and upsell opportunities to be explored in this space. Until one of the major on-demand streaming services can match Pandora’s coming direct ticketing platform however, they are all in a weaker position when it comes to connecting streaming music fans with the live music space, and enjoying any benefits that might bring.