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Costly Internet radio royalty rates left Pandora on the brink of extinction in the summer of 2008. The popularity and success of its mobile apps kept the company afloat until mid 2009, when a more favorable royalty deal was struck with record labels. Today, the newly public company looks healthier than ever.
Pandora is setting its sights on getting its music streaming service on all phones, in all homes and in all cars. It’s a lofty goal that will require the company to first tackle another huge challenge: international music licensing issues.
Mashable spoke with Tim Westergren, Pandora’s founder and chief strategy officer, to find out how he managed to get through the company’s darkest hour, chat about its ever-evolving business model and hear more about what’s ahead for the music streaming powerhouse and its more than 100 million users.
Name: Tim Westergren
Company: Pandora
Year Founded: 2000
Fun Fact: He can play a recorder duet through his nose.
Q&A with Tim Westergren
What inspires you?
Discovering a new piece of music I love. There’s nothing quite like it. Makes my life better. And I have it forever.
What in your mind makes Pandora a game-changer?
That it combines scale with a personalization technology that can truly surface the long tail — that has never been done before in music. The utilization of technology to connect such a wide range of artists with millions of prospective fans is a game-changing proposition. It is for listeners, who never had radio tailored to them as an individual, and artists, most of whom have never had this kind of mass promotion.
What has been the biggest challenge Pandora has faced thus far? What do you anticipate will be Pandora’s next great challenge?
There have been several over the years. One that is still fresh in my mind was the fight over royalty rates when we almost went out of business because the rates imposed by the copyright tribunal were astronomically high.
Our next great challenge is going to be tackling the licensing issues internationally.
What makes licensing music internationally more complicated?
The lack of centralization. Pandora plays the music of over 90,000 artists. This translates into a substantially larger number of rights owners — the artists themselves, labels, publishers, etc.
Without a one-stop shop for licensing, it’s administratively difficult to enable the service. Where these centralized entities do exist, they have demanded royalty rates that are completely uneconomic. I would argue that in so doing, they are failing to serve their very constituents.
When Pandora was in dire straits, was there ever a time when you thought about throwing in the towel? What kept you going?
Never. No matter how tough things got, we’ve always had an unshakeable belief in the power of our idea. We were always convinced we just had to hang on long enough to figure out how to apply it.
There was a time years ago, at a very dark moment when we came close to betting our last cash reserves in Reno, but we ultimately decided that wasn’t proper financial stewardship. Needless to say, with all that we’ve been through, the progress we’re making right now is particularly rewarding.
How has Pandora’s business model evolved over the years?
We’ve “pivoted” numerous times over the years — from online licensing, to a kiosk product for brick-and-mortar retail, to personalized radio. When we did finally find our focus with Internet radio, it was clear that we’d come home.
Since the launch of Pandora, we have made numerous adjustments to our strategy, the most notable of which was a move to very aggressively develop our mobile offerings on smartphones. Our goal is to have Pandora Personalized Radio on every phone, computer, in every car, office and home in the country and, ultimately, in the world.
Describe the transition process from going to a private company to a publicly traded company. Were there any bumps in the road? What did you learn along the way?
It was a very smooth process — we have a solid team in place internally and great partners in our legal and banking teams as well as the folks at the NYSE. They helped make the process as smooth and effective as possible.
Pandora is fast making its way from web and mobile to living rooms and cars. What’s the next frontier for the company?
We still have a lot to go on that front — we’re in a lot of cars and phones and living rooms now, but we want to be in all cars, on all phones, in all homes. Looking beyond that, I’d say our next frontier is international.
What do you think it will take to get Pandora in all cars, on all phones and in all homes?
Time and a substantial continued investment in technology. There is little doubt that Internet radio is on its way to complete ubiquity. The smartphone paved the way, and now virtually every automaker and [consumer electronics] manufacturer is aggressively working to embed Pandora Internet radio into their products.
Does Pandora have a social media strategy?
Yes. In fact, our recent redesign is full of enhancements aimed at encouraging listeners to share and connect with like-minded listeners on Pandora. Our social strategy starts with the product, but we also have a great community manager, Aaron [Morgan], who handles our Facebook and Twitter accounts, and other elements of our online community.
What advice do you have for other entrepreneurs?
Don’t do it alone.
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The Extraordinary Entrepreneurs Series is supported by Diet Coke®. Now, the drink that helps you stay extraordinary brings you extraordinary people. Find Diet Coke® on Facebook for access to a whole lot of extraordinary.
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