#FMC10: The Detailed Tim Westergren Interview

Live coverage from the Future of Music Policy Summit (#FMC10), Georgetown University, Washington DC… 

Tim Westergren Founder and Chief Strategy Officer, Pandora
Kara Swisher Columnist, The Wall Street Journal; Co-producer, D: All Things Digital Conference

 

Swisher: you paid fees when others didn’t, that has been an advantage…

Westergren: Definitely not an advantage… details disparities with various forms of radio.  “We’re still pushing a rock up a hill” to make that part of the business connect.

Discusses the benefits of internet radio, and “as that realization starts to sink in” it will help to create a different rate structure.  The next chance to get back to the licensing table is 2015, something less screwed up this time around.  In the meantime, some opportunity to shift “underlying legislative language”.

 

Swisher: Other models, like subscription?

Westergren: “Subscription is not the solution, I don’t think.”

 

Swisher: Is there another thing evolving?

Westergren: Our business is simple, it’s advertising supported…

Swisher: Do you get to anything else model-wise, or does it just bump along?  All advertising?  So, what happens eventually in the competitive space, is it just one large streaming provider?

Westergren: Room for competitors, though scale is required to get advertisers.  Getting to that level is hard, “it’s a tough business,” and references “my ‘credit card’ years…”

Raised a “big chunk of dough from Silicon Valley” and that allowed him to pay creditors off… that was how Westergren got out of his hole….

 

Swisher: how do you then get to ‘the big’?  

Westergren: Radio has always been and will continue to be the bulk of consumption.  Historically, it has been an advertising supported model… on terrestrial, lack of performance licensing for recordings makes it a “quarantine” to artists.  “Big tectonic shift”… hours that have typically been terrestrial hours are starting to become internet hours… “that to me is a good direction.”

On royalties: “We happen to be paying a ridiculous amount” of royalties, though Westergren [and Pandora] believe in royalties.

And, on advertising: scale is critical – “as we get into scale, you’re going to see the share get matched up…’

stats: 65 million registered users in the US; 25 mm have used it in a given month, avg. 11 hours a month, “super super high” level of engagement.

“Internet radio is a new business, we’re having to evangelize a new sector to the world….” and “we can deliver targeted advertising…” and “on Pandora we celebrate everything,” and “I like Celine Dion, and I own a bunch of her tracks…[j/k, I think]

 

Swisher: So, who’s the real competitor?  Spotify? iTunes?

Westergren: on-demand is not the competitor, broadcast is, notes that 90% of radio listening is terrestrial.  And, among internet providers, “we’re not competing with one another, we’re competing with the rest…”

On the transformative power of the phone…

“we had 100,000 new people just on smartphones every day,” just people activating  “That has given Pandora access into the car and the home,” and “50% is in the car….”

Swisher: Growth is in the iPhone, and what about competitors like traditional radio hitting the app?

Westergren: Apps are huge for us… but it’s extending to connected consumer electronics.  Every piece of CE is made with connectivity… that is all fair game for Pandora.  Smartphones continue to be the most important by “a wide margin…”

Westergren: The average CE user listens for 5 hours a day.  But suddenly, there’s a big screen – opens new opportunities…”

Also, “iPads been huge for us, it will be much more Pandora friendly when it can multitask…”

Also notes that the iPad is a “portable, large screen,” just noticing his own behavior (offers a story of walking to the kitchen), and for Pandora “it’s like a digital album…”

 

Swisher: The car?  Mentions Ford, a lot of ‘Syncing’… 

WestergenFord is very early in this space – Sync detects Pandora on a device, sucks it into the dashboard, and it becomes voice-activated [this will seem boring in a few years…] 

huge opportunity in the dash?  Noted that he [and other radio listeners in the car] have been “captive” to something unsatisfactory… more opportunity for targeted stations…

 

Audience question: How to get onto Pandora?  And how does stuff get slotted into the mix?

Westergren: criteria for getting added:

(1) available for sale on Amazon

(2) music  must be really good.

closer to 70% is from independent artists.  “I stand behind everything we have on there…”

 

Audience question: Will AT&T limits have an impact?

Westegrenso far no impact – Pandora is a “thin stream” that can stay within the bandwidth.

 

Audience question: how to get Pandora into Canada?

Westergren: We’re stuck in the US – for the first year, available outside the US (most popular zip code was 90210).

Licensing major issue currently…  major issues with getting rates more reasonable and normalized.  Blames it on a general fear that digital will lower sales, but “people who use Pandora buy more,” so he feels Pandora is more part of the solution not problem.  Thinks there is a fear that digital should cost more because it cannibalizes…

 

Audience question: why physical requirement for getting onto Amazon?

Westergren:

(1) “We like the hurdle,” wants artists to be serious enough that they create a CD.  “We wanted to be a curated collection,” and “everything is hand analyzed”…

(2) Legacy structure – he needs the UPC data information.

“I know it’s a pain in the butt…” but ultimately this requirement will change.

 

Favorite device?

A really good blender for smoothies at home (crowd applause).