Coming just a few days after the online radio/recommendation giant Pandora’s IPO, another online radio service, Earbits, has taken $605k in funding from Y Combinator, Charles River Ventures, Start Fund and former Lala CEO Geoff Ralston.
Online radio is a difficult space with the exorbitant SoundExchange fees and major competition both from traditional broadcasters and on demand streaming offerings such as Spotify and Rdio, but Earbits is taking a different revenue model than its competitors who fund their free service through advertising and premium upgrades. Instead, Earbits founder Joey Flores likens their business model to “payola 2.0”. Yes, that illegal practice of record labels paying radio stations to pay their music – a kind of bidding war to the detriment of both listeners and the new bands and artists the labels are supposed to nurture.
EDIT: The bidding on Earbits is one part of an algorithm to match songs to a listener’s tastes along with the genre they have picked, past thumbing +/- of songs, and other factors – not pure Payola.
Payola destroys the method in which good music bubbles to the surface and bands are broken to a wider audience as money becomes the driving factor to airplay rather than talent or songs. Apparently Earbits are working with 140 record labels and Grammy award winning artists across 80 channels, with 1700 artists total – but I hope those labels and independent artists realize that the only winners in payola is the company/individual that receives the money. The audience get a watered down, lowest common denominator version of music that execs think will sell most widely, and artists have money that should have been spent on their development lining the wallets of Earbits and their investors. The money spent would likely be taken out of the artist’s cut of their proceeds as well as it would be described as “promotional activities”.
For record labels to pay fees to Earbits is short-sighted, but for music fans who have been enticed by Earbits’ claim of advertising-free music should know that whilst the ads may not be for car insurance or furniture sales, the “music” they are listening to are adverts just the same and are not picked on quality but on payment to the exclusion of new and independent artists. Don’t believe the hype.