Pandora and many other digital music radio businesses have a somewhat analog-style problem: music royalties scale up proportionally, the more people use the service. That makes internet radio services that rely on the standard, government-set rates different from just about any other kind of digital business. If 10 million people pay for your blog, say, it doesn't cost you much to add those users, incrementally speaking, so it's just about all gravy.
But if you're Pandora, your costs rise exactly as fast as your usage increases -- which would be fine, except that the world has a limit number of ad dollars in it, and those have many, many places to be spent these days, so ad prices go down as volume goes up. (This is likely why Apple wants to copy Slacker's approach by doing individual deals with labels and publishers instead of paying the government-set rate.)
Pandora's new television version only works on gaming consoles today, but in the coming months and years, its HTML5 architecture will help it run directly on televisions, set-top boxes, and other devices
You know one way to make ads pay a higher rate? Put them on the biggest screen you can find -- and that is the first reason Pandora's new HTML5 version for televisions, which you can access today by pointing a Sony PlayStation 3 or Microsoft Xbox 360 at tv.pandora.com, makes sense.
Reason 1: Bigger screen = bigger checks = happier shareholders.
Second, the television is a killer platform for music -- not just because of that big screen for concerts and music videos, but because when people buy nice speakers these days, they tend to be connected to televisions, whether it's one of those "sound bar" things or a full-on surround sound system. Music deserves to be on the best speakers in the house, and those are often the ones that connect to the television -- especially in the case of hardcore console gamers. Reason two: nice speakers (sometimes).
Finally, there's the use of HTML5. Pandora's approach will let it scale across a wide variety of "smart" televisions, as soon as their browsers catch up with the level of HTML5 support currently found on computer browsers, and now found on these gaming consoles. Over 10 million people have listened to Pandora on televisions so far, according to the company, but reaching them required Pandora to build custom versions for each device, which is a pain.
Your television or set-top box, if you have one, can't handle HTML5 -- yet. According to Pandora CTO and EVP of product Tom Conrad, it's one web standard that will help the internet of things take off:
Today tv.pandora.com runs perfectly from the browser in your existing XBox 360 or Playstation 3 and the system will spread to other environments as more vendors bring standards-compliant TV's and set top boxes to market in the coming months. It's also a completely new approach which will allow us to evolve the "10 foot" experience of Pandora with greater flexibility and speed than ever before...
We're still in the early stages of a transition to a world where all of the devices we interact with throughout the day – our TV’s, our stereos, our refrigerators, our cars, our watches, our eyeglasses — are all connected to the internet. This then begs the questions: how will developers create applications for this incredibly diverse set of devices? We think the answer can be web standards. The world doesn't need more proprietary platforms fragmenting the innovative efforts of developers everywhere. The PC world was transformed by the emergence of the standards-based web twenty years ago, and we think the same solution will serve to unify the coming "Internet of things." tv.pandora.com, and the new platform from which it was built, is our first step to lead the industry down this path.