The recent online buzz about changes at music-streaming apps Spotify and Pandora is music to the ears of Mad Genius Radio's founders. - See more at: http://www.madgeniusradio.com/press/#sthash.B5Y4SdYX.dpuf
The recent online buzz about changes at music-streaming apps Spotify and Pandora is music to the ears of Mad Genius Radio's founders.
Country-pop artist Taylor Swift recently pulled some of her music from Spotify's free-access service to drive paying listeners to buy her latest recording. Pandora, the Internet's 80-million-user web-radio giant, struck an alliance this summer with independent record labels to favor their songs in return for cheaper rates for the songs played in Pandora's free, ad-supported version.
Eric Neumann, founder of Denver-based Mad Genius Radio and a veteran of the radio business, believes these machinations show the wisdom of going to a straight subscription business — like Netflix for songs. Or like his 10-employee startup.
"These are premium apps that do interesting things for consumers — it's fair to ask for money for that," he said. "It's better for the industry and the artists, and ultimately the consumer."
It'd be better for Mad Genius, too. The company in October threw open its online music to service to all customers, asking $5 monthly or $48 annually.
The debut followed months of developing Mad Genius' software to be what Neumann and CEO Max Fulton say is a more satisfying and nuanced way for users to get the music they want to hear.
Mad Genius subscribers can select several genres to include in their personal streamed-music rotation, and fine-tune how heavily featured certain styles, particular artists and new music will be.
Neumann argues a Pandora-style user ratings and computer algorithms for selecting songs are incapable of covering the broad range of tastes and shifting moods of many listeners, so Mad Genius gives subscribers control.
""We don't think it's an algorithm that can do it," Neumann said.
And while the free version of Pandora has grown huge, its financial success relies on the thing listeners like least.
"When the biggest complaint is the ads, there's got to be a better way," Fulton said.
The hope is that some listeners find their way to Mad Genius, and not to Pandora's subscription version or one of the growing number of streaming music alternatives.
It's difficult to generate the ad revenue to pay for the cost of music programming, which is what has driven compromises like Pandora's with some record labels. Over public airwaves, the deal could be construed as illegal payola, but not so online.
Mad Genius, like other services, buys music from SoundExchange, a digital rights organization, at a rate of $2.50 per 1,000 songs played and 5.5 percent of total music-generated revenue.
Ninety-five percent of what's paid is split between the artist and record label, and it amounts to more for the artist per-song than what ad-supported radio generates.
Neumann says Mad Genius' subscription business can sustain growth and be profitable with hundreds of thousands of users. And if Mad Genius grows to have millions, like Pandora or Spotify, that would make it a hit for everyone involved, he said.
Greg Avery covers tech, telecom, aerospace, bioscience and media for the Denver Business Journal and writes for the "TechFlash" blog. Phone: 303-803-9222.
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