The conversation quickly changed direction and started deviling into the future (or potential lack there of) of radio. One of the most interesting quotes from the article is by Tim Westergren, founder of Pandora:

New generations of wireless Internet-connected devices will vault the Web’s customized radio services into places where broadcast radio is still dominant: in cars for example. “All of a sudden the competition for your ear there changes dramatically,” Mr. Westergren said. “The FM station then has to compete with a personalized service that you’ve crafted for yourself. That’s a watershed moment.”
– from "The New Tastmakers" by JEFF LEEDS

I completely agree with Mr. Westergren on this issue.  Here is why it gets interesting, first lets look at the new Sirius device that was just released, the Sirius Stiletto 100. At first glance this another portable MP3 Player with a satellite receiver built into it, but as pointed out in article "Finally, a Sirius iPod Threat" the device has built in Wi-Fi support. Sirius is now offering their SIR (Sirius Internet Radio) service which the device can access via Wi-Fi connection.

Now, let’s look at where Wi-Fi is going.  A good example is my previous post about AC Transit and Wi-fi. Now, when I am in transit I can access my SIR service without requiring the satellite feed (and the chance it will be blocked by the bridge or tunnel). Another big change for Wi-Fi would be the just announced plan to blanket Silicon Valley with Wi-Fi:

The project will cover 1,500 square miles in 38 cities in San Mateo, Santa Clara, Alameda and Santa Cruz Counties, an area of 2.4 million residents. Its builders, going by the name Silicon Valley Metro Connect, said the service would provide free basic wireless access at speeds up to 1 megabit a second — which is roughly comparable to broadband speeds by telephone — in outdoor areas.
– "Silicon Valley to Receive Free Wi-Fi" By MATT RICHTEL

Let’s take the next jump… what if SIR and Pandora teamed up?  What happens if there is a hack for the Stiletto that allows you to stream other services?  What happens if you can take advantage of the two-way communication Wi-Fi allows?  You could have a Tivo like thumb up/down button on your device to modify your Pandora account.  Now, you have truly interactive portable music anywhere.

As Wi-Fi grows and more municipalities look into providing Wi-Fi as a service, this really changes the future of terrestrial radio.  For many years people have predicted the so called "death of radio" and have been wrong.  I am not going to follow them and announce that radio is dead… but, I feel we are seeing a truly important change in the future of authoritative broadcasting. One where listener input is no longer just a phone call and a request, but a real-time personalized adjustment that plays what you want to hear when you want to hear it.

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As reported in Forbes Market Scan, the RIAA is “posturing for larger payments”. What this ends up meaning is that if the RIAA raises the royalty rate, to continue to sell these devices XM and Sirius will need to pay more royalties per device. The concern that XM and Sirius have is that if the royalty is to high then the profitability of the service for them will drop and if they lose too much money then XM and Sirius may have to kill the service. Other possible outcomes are that the RIAA will require other services/features to be added (specialized DRM, limited recording ability, etc.) to the devices for the contract to be agreed to which could possibly limit sales and profitability.

Once again the RIAA is going after new technologies and attempting to get more blood from the turnip. I understand that the RIAA job is to protect their company’s rights but the sheer aggressiveness they take is always astonishing to me. They complain about losing money and dropping revenue so instead of looking for better ways of treating their customer base they use strong-arm tactics to force money out of them and wonder why they are losing more customers and having public backlash.

It’s a tough balance, you need to protect your investments and you need to grow your company, at the same time you need to keep your customers happy because you want them to continue to use your service. Balancing these two, often opposing, viewpoints is a delicate act, but what we are seeing is more and more large companies taking a ‘forgot the old customer, we need new customers’ attitude and focusing on profit. This works in the short term but what happens when you start reaching the market cap? Also, we forgot how powerful word of mouth and happy customers help further sales, but we also need to focus on our quarterly report to the shareholders… hmm, who wins that argument?

Sources: Forbes Market Scan, Billboard Radio Monitor