The popular internet radio's co-founder isn't worried about the lack of profitability –or a challenge from Spotify
Want to find out when a musical artist you like is coming to town? Pandora will tell you.
While the online music service has spent the last decade attempting to transform music radio, it could also be instrumental in revolutionizing another key part of the music industry – the touring business –co-founder Tim Westergren said on Tuesday at TheGrill, TheWrap’s annual media conference.
Because of the amount of information Pandora collects about its users – registering requires revealing your gender, age and zip code – it can tell its customers when their favorite artists are playing near them.
(Photograph by Jonathan Alcorn)
“That is a recipe for solving, in my opinion, what is the most important or second most important challenge for musicians – how to get people to come see you play live,” Westergren told moderator, TheWrap's Brent Lang, on stage Beverly Hills' SLS Hotel.
Westergren cited a recent show folk-rock songstress Aimee Mann played in front of a packed house thanks to a Pandora e-mail campaign. The company messaged people who “thumbed up” Mann on Pandora and also lived within driving distance.
The result: Her fans showed up in droves to a show they otherwise would not have known about. When the show finished, the club owner asked Pandora to do the same for another 12 shows. (It didn’t.)
Westergren, a self-declared musician, said that this kind of campaign could help countless struggling artists.
“If artists like that could plug into an infrastructure like this maybe we can solve that problem,” Westergren. “It could be the difference between a short career and a long one.”
(In the video below, Westergren decribes the moment he realized that Pandora had major advantages over traditional radio. Watch his full session at TheGrill here.)
What of Pandora’s own perceived problems, namely its unprofitability — and the rise of Spotify?
Westergren declined to discuss the company’s financials, which have been placed under greater scrutiny since it went public in June.
“We are going after transforming an absolutely enormous category,” he said. “We’ve been around for a long time. How we make decisions and invest, spend the money we have, the market is based on an objective that is much further out than what people are writing about this week, this month.”
As for Spotify, Westergren sees the hugely popular service as a compliment to Pandora, not a rival. In fact, he all but dismissed the notion that Spotify was a threat to Pandora in how he depicted consumers’ music listening tendencies.
An incredible 80 percent of the music people listen to comes via the radio. That is the market Pandora is in.
Meanwhile, 20 percent listen through other means – mostly CDs, mp3s and subscription services. That means Spotify.
“We see this on-demand thing to be complimentary to what Pandora is doing,” Westergren said. “We have existed alongside subscription services since our launch.”
Spotify would no doubt dispute such a characterization, at least when it comes to the extent of the discrepancy in listening tendencies. Moreover, Spotify can boast something Pandora cannot – international appeal.
Westergren said Pandora has made no secret of its ambitions to expand to new markets. However, licensing fees are preventing any global endeavors.
“It is a great frustration for us,” Westergren said. “Licensing constraints prevent us from launching in other countries. It’s not for lack of trying or interest. To launch one like ours with 90,000-plus artists, you need straightforward licensing structures. The same structure does not exist elsewhere.”
That means that for now, Pandora is stuck in the domestic market with the same primary revenue stream – spot advertising.
So how can it reach profitability?
Perhaps through continued mobile expansion. Perhaps higher advertising premiums.
Whatever pressures Pandora may be under to reach profitability, its co-founder does not seem fazed.
“We are just a radio company but were a really really good one,” Westergren said.
What makes it so good? It responds directly to the desires of its consumers, satisfying those who like marching band music or classical, rock or rap. Old artists share space with new artists, unknown musicians with superstars.
"We are giving substantial exposure to a huge reportoire of artists who have never been on radio in the past," Westerngren said.
Pandora also rewards musical artists in a way that public radio does not since those artists get money when their music plays online.
But hey, if radio doesn’t work out, it can always become a concert promoter and make those artists even more money.