Pandora CEO: Music Shouldn't Be (Completely) Free

As Pandora preps to enter the on-demand streaming battle royale, CEO Brian McAndrews is taking jabs at the freemium business model espoused by Spotify and YouTube.

In a recent op-ed in Business Insider, McAndrews explained the somewhat obvious challenges the transition from physical to digital has created for music companies.

Years ago, if anyone could have walked into a record store, legally taken every record home for free, and listened to the exact songs they wanted for as long as they chose, the music industry model would have completely broken down. But that is exactly the situation the music industry faces today.

Free-to-the-listener on-demand services are driving down music’s intrinsic value by creating a “gray market.” By that I mean a market where listeners can perpetually access licensed, free, on-demand music. An ever-growing number of listeners are happily lingering in music’s gray market, enjoying full access to all music without paying for the privilege and with little incentive or intention to convert to a full-paying subscription.

It's a very public hint at how Pandora might leverage its massive base of listeners to monetize a forthcoming on-demand streaming service, and most certainly a peace offering as the company preps to negotiate new on-demand licenses with labels and publishers.