Kennedy and Pandora wished to wind down their relationship on a positive note, citing milestones like 67 million monthly active listeners and 70% market share. But most telling were the company's revenue and income figures. In fiscal 2013, Pandora totaled $427.1 million in revenue and $255.9 million in mobile revenue, with $125.1 million in revenue for the quarter that ended on January 31.

While those numbers beat Wall Street expectations and represent record revenue for the company, it still wasn't enough to push Pandora into profitability - and Wall Street doesn't like it when a post-IPO company is growing but still loses money. That likely translated into Kennedy's decision to step down.

On that $125 million in Q4 revenue, Pandora took a quarterly loss of $14.6 million (9 cents per share), which exceeds its year-ago quarterly loss of $8.5 million (5 cents per share) on revenue of $81 million. Given the long string of losses, Pandora has been aggressively seeking ways to wring more cash from its subscribers, including limits on free listening and a fierce lobbying effort against royalty fees.

(See also Pandora Remixes Its Free Listening Limits.) 

The Oakland, Calif.-based music recommendation service has had an up-and-down ride on the market since its IPO in the summer of 2011. Initially, Pandora opened at $16 per share and jumped into the $20s, but has since hovered just into the double-digit mark as the company scrambles to find ways to turn a profit.

(See also Could Music Licensing Costs Kill Pandora? Ask Lastfm.)

Despite the tumultuous relationship with investors, Wall Street seems to be responding well to Kennedy's decision: Pandora shares jumped almost 20%, to $13.96, in after-hours trading. 

Just like written news, audio content is delivered much more effectively via the Internet than by traditional means. But FM radio is going strong and Internet services comprise only a tiny percentage of total listening time. Now, though, more and better in-car integrations are about to give Internet radio a huge shove into the future. 

At the Consumer Electronics Show (CES) in Las Vegas this week, the partnerships are springing up left and right. Chrystler and GM are teaming up with iHeartRadio. Rhapsody is coming to new Ford cars. So is Amazon Cloud Player. Slacker Radio is integrating with Chrystler's UConnect in-car entertainment system, which happens to be Pandora's 19th such partnership as well. 

Expect to see many more of these integrations between cars and digital media services. Not only are one-on-one formal partnerships becoming more common, but cars are becoming platforms for third-party app developers. Ford just launched an open-source software development kit (SDK) so apps can be built right into the steering wheel and dashboard. One of Ford's technical partners is jacAPPS, an app development house with a long list of digital radio projects under its belt. "They're people who understand radio, working on radio's in-car future," writes radio futurologist James Cridland. 

Terrestrial radio isn't sitting idly by, either. Clear Channel has been aggressively developing its iHeartRadio service, which is being built into more and more new cars. Meanwhile, NPR is already working with Ford Sync, Audi, Honda and Subaru, with several more partnerships with carmakers in the works for 2013. 

Changing The Face Of Radio, V-e-r-y S-l-o-w-l-y

All of this is a big deal for Internet radio adoption. Americans do about half of their radio listening in the car. Connecting smartphones via auxiliary cables and Bluetooth is increasingly common, but the user interface remains clunky and jumping from app to app and queuing up Internet radio stations can be cumbersome - if not outright dangerous - while driving. That's why Apple is working with car manufacturers to integrate Siri into the dashboard. It's also why voice control is a central feature on Ford Sync. 

These deals aren't going to kill terrestrial radio overnight, or perhaps ever. After all, radio stations don't crash or experience service outages like Internet apps and services too often do. And radio signals remain much more reliable than Internet connections, especially in moving vehicles. More to the point, though, while all of the new innovations are neat, new cars are expensive and the roads are filled with older ones that run just fine but don't have the latest technology. It will be decades before technology like this exists in a majority of U.S. cars. 

By bringing the most popular Internet radio and music streaming services directly to the dashboard, car manufacturers are making the user experience even more seamless - and crucially, putting more listening options at driver's fingertips. It will be a slow process, but expect radio to sound more decidedly less old-fashioned as more connected cars fill the road.

Indeed, the biggest moments in music tech this year all had to do with piracy or the tricky evolution of a business model to replace the one that started dying a decade ago. 

1. The Death Of SOPA / Megaupload Raid 

These two events were not officially related, but they happened within 24 hours of each other and they both helped frame the debate about content piracy. In late January, the uber-controversial anti-piracy bills called SOPA and PIPA were tabled by the U.S. Congress after massive online protests. The death of SOPA meant the fabric of the Internet would be spared from the wrath of the Recording Industry Association of America (RIAA) and Motion Picture Association of America (MPAA) and set the stage for new legislative battles.  

Just as that attempt at fighting piracy ended, an even more dramatic one began when New Zealand police - by request of the U.S. Justice Department - arrested Megaupload founder Kim Dotcom and several of his colleagues in a military-style raid. The hacker group Anonymous responded with large-scale Distributed Denial of Service (DDoS) attacks that took out the Department of Justice's website. For the first time, the so-called "piracy wars" started to look like an actual war. 

The Megaupload raid marked the beginning of a lengthy legal procedure, but it also raised major questions about the rights of non-infringing cyberlocker users and caused similar services to get more serious about fighting piracy, if they didn't shut themselves down all together. 

2. Lars Ulrich Hugs Sean Parker, Embraces Spotify 

There could hardly have been a more symbolic official end to the Napster era and more importantly, the beginning of one in which all-you-stream music subscription services are seen as a legitimate way forward for the industry. Metallica drummer Lars Ulrich not only shared a stage with Napster cofounder Sean Parker to announce the band's arrival on Spotify, he hugged him. 

Major questions remain about the viability of Spotify's business model and whether it can fairly compensate artists, but it's still early in the game and the fact that Metallica has embraced the model is a positive sign. Don't hold your breath for The Beatles, though. 

3. BitTorrent Goes Legit

2012 was the year the strict association between the word BitTorrent and piracy started to erode. It still has a long way to go, but BitTorrent, Inc. has been aggressively marketing itself as a legitimate content distribution platform and teaming up with established artists and authors to prove it. 

Author Tim Ferriss may be the most high-profile content producer to partner with Bit Torrent, but musicians have been experimenting with the platform as well. After Pretty Lights published a bundle of free music and videos on BitTorrent, it soared to the top of Pirate Bay's download chart, the DJ saw a 700% increase in traffic to his website, collected 100,000 email addresses and, probably not coincidentally, sold out two concerts at the Red Rocks amphitheater in Colorado. For musicians, BitTorrent may provide an unexpected path to revenue.

4. Internet Radio Fairness Act Introduced

Internet radio providers like Pandora and iHeartRadio are expensive to operate. That's largely because these companies operate under a different royalty rate regime than terrestrial and satellite radio stations, both of which pay far less than Pandora to copyright holders. 

In September, a bill called the Internet Radio Fairness Act (IRFA) was introduced in the U.S. House of Representatives that aimed to level the playing field. Record labels, royalty collection organizations and some artists were less than thrilled with the IRFA. Congressional testimony and debate got underway in November and the issue is expected to continue to be a contentious one in 2013. 

Whatever happens with the IRFA as it was originally drafted (many predict its demise), something needs to give, and that something will have to balance the need for innovation with the rights of those who create music for a living. The end result of the debate that kicked off in 2012 will have a huge impact on radio's future. 

5. Amanda Palmer's Blockbuster Crowdfunding Experiment

2012 was the year that independent musicians, desperate for a new business model, started taking the crowdfunding craze seriously. In an age when revenue is harder and harder to come by for musicians, many turned to fans to help fund the recording of their album, production of music videos and other projects.

There were plenty of successful campaigns, but none got more attention than that of Amanda Palmer. The singer took to Kickstarter to fund the release of her album and ended up blowing past the $100,000 goal to rake in more than $1.1 million. Suddenly, crowdfunding looked like a viable model for musicians. 

The Amanda Palmer example is not without its caveats, though. For one, not all independent artists will have a fan base as rabid as the famously social media-savvy Palmer. About half of all music-related Kickstarter projects fail to reach their goal. For the right projects and artists, though, crowdfunding can work quite well, as Palmer demonstrated. 

Any artists that do luck out on Kickstarter might want to do their best to avoid the public relations headache incurred by Palmer after she invited unpaid musicians to play with her onstage - and was subsequently lambasted across the Web. 

Image courtesy of Shutterstock.

Probably not anytime soon. But it's certainly true that these high licensing costs make it much more difficult to do business. For evidence of that, look no further than Last.fm. Next month, the algorithm-fueled Internet music service is scaling back its most radio-like feature in several countries.

In the United States, Canada and the UK, Last.fm's radio streaming feature will still be available via Web browsers, but using it from their desktop client - just like its mobile apps - will become a subscription-only feature. The reason? You guessed it: The cost of securing rights to that music is too high for Last.fm to make the end product freely available, the company says.

In the UK, music licensing costs are even more onerous than they are in the United States, says radio futurologist James Cridland. It's exactly why Pandora isn't available there, nor is there an equivalent service. Last.fm is probably the closest thing the UK has, and it's about to see its functionality scaled back. 

"I'm not sure what the magic bullet is," says Cridland. "But at some point people need to stop and ask why there isn't a Pandora in the UK, which after all is one of the countries that produces the most music in the world." 

Cridland has done the math. Running a service like Pandora in the UK would require a company to pay out more money in licensing fees than they could conceivably earn in revenue.  

Internet Radio Is Expensive And Hard to Monetize

For Last.fm, licensing costs aren't the only part of this equation. It's also worth looking at the other end of the business model - namely, the revenue side. The fact that Last.fm is cutting its free radio service out of its desktop app suggests it's tightening up its freemium business model overall. 

It makes sense. Last.fm's desktop app collects a lot of listener data, but it doesn't appear to directly make money. I can play personalized stations from this app all day long without ever seeing or hearing an advertisement. Starting January 15, I'll have to go to the Last.fm website, where the entire layout is wrapped in display ads and before my Notorious B.I.G.-inspired station starts playing, Taylor Swift will try to sell me some perfume. 

The fact that Last.fm is pulling radio out of its desktop app all together - as opposed to augmenting it with audio ads - suggests that audio-only Internet advertising isn't quite as potent a force as once thought. Personalized, targeted radio ads seem powerful in theory, but they're far more lucrative when paired with video and display advertisements. Paying subscribers are even more valuable. Clearly, Last.fm is hoping to push users in either of those two directions as it continues to navigate a digital music marketplace that looks very different than it did when Last.fm was founded almost a decade ago. 

Last.fm isn't the big fish here - it's the canary in the coal mine. Pandora is far better-positioned than Last.fm, its chief U.S. competitor. Yet even at the head of the pack, business in the streaming music space is brutal. Music licensing costs may not kill Pandora, but Last.fm's troubles make it clear that the issue can wreak havoc on a music service's core functionality. No wonder Tim Westergren won't shut up.

These musical insights and many, many more can be gleaned from a massive, interactive data set published by Last.fm, the Internet radio and recommendation service. Its user base might not be a representative sample, but the numbers are still fascinating. Last.fm has also put together an interactive timeline breaking down music milestones and trends tied to its own music playback data. Rick Astley saw a big spike in listens in 2008, for instance, when "rickrolling" was at its peak. 

Last.fm has now been tracking everything its users listen to for a decade. Its "scrobbling" technology has been watching us hit the Play button since the iPod was a chunky white brick with a big click wheel. Today, it's baked into Spotify, a Chrome add-on and a host of digital music platforms and apps. 

The Value of Last.fm's Aggregate Listening Data

The service may not get the attention it once did, but Last.fm holds a uniquely significant, if underrated asset: Big Data. By embedding itself on desktops, mobile devices and within music services, Last.fm has an unparalleled, platform-agnostic view of what people are listening to. As a user, I can see which artists, empirically speaking, I listen to the most. Which songs I played excessively six months ago. 

Last.fm, of course, uses this data to recommend new music to me, which it actually does quite well. But there's also huge value in the aggregate data it collects.

What good are traditional music sales charts when people download torrents, stream albums on Rdio and check out new bands on YouTube? Not much actually.

But if we permit it, Last.fm can watch all of that activity, compiling rich and detailed data about what we listen to, both as individuals and as a group. That aggregate data could be a goldmine of insights for radio DJs and other tastemakers, argues radio futurologist James Cridland. He's right.

I hope Last.fm keeps spreading its API far and wide, and that more people opt to use the service, even if it does lack the buzz of Spotify or the headline-grabbing power of Pandora. The company should push hard to forge partnerships with music apps, hardware manufacturers and mobile platforms to keep collecting all that data. 

The insight we stand to gain would be pretty incredible.

We don't know exactly what radio will look like in 20 years (or if we'll even still call it that), but it's safe bet that it would it be utterly unrecognizable by the likes of Edwin H. Armstrong, who was awarded the patent for FM radio in 1933. We'll always have audio, but transmission via radio waves will be augmented by wireless Internet standards like 4G mobile broadband and Wi-Fi. Those networks will carry much more interactive and smarter audio content, which will likely push traditional broadcasters toward a more personalized experience. 

So who's forging this future? It's still early - and this space will undoubtedly be occupied by a few now-unfamiliar names by 2030 - but there are a handful of organizations already busy chiseling out that future. Keep an an ear on these 5:

Stitcher Radio 

Stitcher Radio is amazing. The four-year-old company blends terrestrial broadcasts with popular podcasts to let users build a highly personalized, lean-back radio experience. Since I started using Stitcher, I've spent a little less time in the NPR iPhone app (though I haven't abandoned it completely) and Instacast, which I had used to subscribe to podcasts. Stitcher also streams other local, non-commercial radio stations in your locale, which you might miss if you don't have an FM radio in every room in the house. 

Like Pandora does with music, Stitcher builds smart radio stations based on your preferences, which are based on your listening history and the familiar thumbs up/down tapping. It's great. If I want to listen to audio hands-free, Stitcher will play back new episodes of my favorite podcasts and public radio shows without me having to fidget with a radio dial or smartphone app interface. Stitcher features content from CNN, NPR, BBC, Fox News and a host of providers large and small. 

How It's Looking Forward: Earlier this year, Stitcher Radio announced a partnership with Ford, who will build the service (along with Pandora) directly into its new cars. Smart. 

Pandora

This one might seem obvious, but Pandora has stayed on top of the personalized Internet radio market for years, despite challenges by everyone from Last.fm to Spotify. The company faces some significant hurdles. As a public company, Pandora now must deal with pressure from investors - and the ongoing battle over artist royalty payments will likely come to a head in the U.S. Congress next year. But Pandora isn't going away.  

For my money, Pandora's Music Genome Project still provides some of the smartest semi-automated music recommendations out there. It doesn't yet rival the brain of a real live tastemaker, but it's getting there, thanks in large part to the human intelligence that heavily fuels Pandora's algorithm.  

How It's Looking Ahead: Like Stitcher Radio, Pandora is finding its way into new cars. It's also begging Congress to rethink the unbalanced artist royalty payments that Internet radio providers pay. Not everybody loves Pandora's proposal, but something has to give for this model to remain viable. 

Spotify 

Not so long ago, you wouldn't have associated Spotify with Internet radio. That's because the on-demand streaming service never attempted to offer the type of functionality that Pandora, Last.fm and Slacker have long been known for. That all changed last December, when the Swedish startup launched Spotify Radio, which emulates Pandora's functionality using the Echo Nest, a competing music recommendation engine. Any doubts that Spotify was serious about this push were cast aside in July, when Spotify Radio was made available for free in the service's mobile apps. 

How It's Looking Forward: Spotify's most promising feature is its third-party app platform. The year-old store now boasts more than 60 apps focusing on discovery, social music, promoting individual artists and whatever else developers can cook up. The platform is still desktop-only, but once it starts to go mobile, it will fundamentally change the way listeners consume music on the go. 

National Public Radio

If old media are supposed to be crusty and slow-to-innovate, you couldn't tell it by looking at NPR. The public radio nonprofit first went on the air in 1971, but unlike some of its counterparts in print media, it hasn't been sitting out the digital revolution. NPR's Digital Services team has been busy creating application interfaces, Wordpress plugins and experimental Web radio products. Its social media presence is impressive and its podcasts are some of the most popular on iTunes. 

Most importantly, NPR has invested heavily in its mobile strategy. It's got some immersive and content-rich apps for iOS, Android and Blackberry and has been proactive about using HTML5 to build a cross-platform, modern radio experience that works on just about any device.

How It's Looking Forward: NPR knows that it needs to be present on every platform its listeners might be using, and its done an impressive job of achieving that. By maintaining this spirit - especially when it comes to mobile devices - it pretty much guarantees itself a prominent role in radio's future. And NPR also knows the importance of partnering with car makers. 

Clear Channel 

NPR isn't the only industry incumbent that's thinking ahead. Terrestrial radio conglomerate Clear Channel sees the threat posed by innovative startups and has responded accordingly. Its iHeartRadio service combines 1,5000 live broadcast stations with personalized channels fueled by the Echo Nest's music recommendation application programming interface. 

The company's digital efforts are merely breaking even, but it hopes to change the equation by joining Pandora in its quest to get Internet radio royalties reduced. Digital may make up only about 5% of Clear Channel's total listenership, but the company knows where radio is headed. 

How It's Looking Forward: By putting its massive weight behind Pandora's quest to reduce Internet royalty rates, Clear Channel helps make change more likely. It also provides its own API that developers can use to bake iHeartRadio into other products, including cars. 

Other Players Forging Radio's Future

Narrowing this list down to five organizations was tough. So many technology and media companies are working on things that will make up the future of what we today call radio. Satellite radio will play a key role alongside FM and Internet radio, presumably led by Sirius XM for the foreseeable future, at least in North America. 

When I prop up my iPad and stream content from NPR, Stitcher or Spotify, it's a bit like using a futuristic radio. On my iPhone, smaller versions of those same apps let me bring the content with me in the car or when I'm walking down the street. Along with Samsung, Nokia and others, Apple is already building much of the hardware from which we stream audio content. Cupertino recently solidified this role by partnering with car makers to tighten iOS integration in vehicles. The company is even rumored to be launching its own Pandora competitor in 2013. 

It's not just giants that are jockeying for a spot in radio's future. Under-the-radar upstarts like Shuffler.fm and the Hype Machine turn music blogs into lean-back, mobile-friendly listening experiences. Even SoundCloud is growing more radio-like. Meanwhile, The Echo Nest's complex music recommendation algorithm is woven throughout a long list of Internet radio products, each of them aiming squarely at Pandora.

Lead photo by Rafael Kage.