Today In Music: Q&A with Tim Westergren founder of Pandora

January 20, 2011

Q&A: Tim Westergren, Founder Pandora

Pandora_Tim Westergren11Pandora is the leading Internet radio service in the United States with more than 75 million registered listeners  claiming more than 50 percent of that market using its free service. It is one of the top five most download apps across smartphones and mobile platforms like iPhone, Android and BlackBerry according to Nielsen research with more than 50 million total mobile downloads.

It was launched on the Web in 2005 by Westergren and to date has raised more than $56.3 million through five rounds of funding according to TechCrunchwith backing from names like Greylock Partners, Hearst Interactive Media and Allen & Co.

Earlier this month sources told Reuters that Pandora has opened early conversations with bankers about a possible $100 million IPO . The company has declined to comment on any details of the potential offering.

Q: How is the business going right now?

Tim Westergren: Things are going great. We’re definitely at something of an inflection point, principally driven by the evolution of the connected system around us like cars and various consumer electronic devices. While they don’t individually represent big numbers relatives to computers and smartphones, just the fact those are becoming markets we can go after now is a very substantial change for us. It’s a big thing on our radar right now jumping on anytime anywhere distribution.

How does Pandora work in a car?

TW:  It’s live streamed to the car with your mobile phone providing the connectivity. It’s like a modem. It brings the application into the car and either through a wire or Bluetooth the car takes control of the app away from the phone so you can control it through any number of car dashboard features.

How much will streaming cost me on my phone?

TW: It’s based on your cell mobile plan. For example AT&T has a data plan with a 2GB limit and your average Pandora user consumes less than 10 percent of 2GB. Pandora streams very efficiently so it doesn’t use up  too much bandwidth.

Where are you looking for business expansion?

TW:The big arenas for us are the car, half of all radio listening happens in the car so it’s very important, and then there’s this ecosystem of connected devices with everything from blu-ray players and flat-screen TVs  to refrigerators – Samsung just unveiled a refrigerator with Pandora. Virtually every piece of new (consumer electronic device) is Web-enabled and if it has audio or a speaker it could deliver Pandora. There are over 200 connected devices that can stream Pandora.

It doesn’t sound like this requires major capital spending, more a partnership strategy perhaps?

TW: That’s the beauty of the business  it doesn’t. There’s a great symbiosis where they need interesting applications to help sell devices –and we’re looking for distributions.

You settled your issues on Internet royalty rates some years back are you happy with where your content costs are today?

TW:  We negotiated a resolution which runs through 2015. Our rate is known but we continue to work on a lack of parity because Internet radio pays a lot more than other forms of radio. And it’s a case where over time new platforms have come out and been treated differently for no apparent reason. So Internet radio pays a much higher royalty per song than Sirius XM for instance while broadcast radio pays no performance fee. So we’re not happy with that still.

Where does the majority of your revenue come from today?

TW: The lion share of our revenue is still advertising though we have a subscription business for $3 a month advertising-free.

I don’t hear that many adverts  on Pandora. Is that intentional?

TW: We do about three an hour right now and they’re only 15-seconds long typically but they’re also targeted so you might not have been in our target bracket…but it’s our goal to have you hear more.

One imagines the trends are upwards with Internet radio advertising as with other Web advertising?

TW: Absolutely. I think a handful of things have happened we’ve grown to be a reach publisher, we have a really large audience. Large brand advertisers now see Pandora as a platform that gives you reach. We’ve definitely see a shift with large advertisers getting a little bit more strategic with us, it’s become a more significant destination for the advertising spend. Our advertising works.

What does that mean for the advertiser?

TW:The metrics they care about whether it’s click-throughs, conversions, or it’s recall…if you campaign on Pandora they work and we have a very high repeat rate among advertisers.

What is the typical Pandora user profile?

TW:There really isn’t one typical Pandora user  anymore. It has become much more of mainstream audience now we have an equal number of men and women which is a clear sign that it’s much more mainstream and we have anyone from 90 year olds to 13 year olds using the service.

What revenues did you do last  year?

TW: We can’t discuss numbers but it’s all going in the right direction.

How do you see Pandora diversifying its business beyond radio advertising?

TW: Actually I don’t , we actually have a huge business still to grow…we’re a little over 2 percent of all radio listening in the US.  There’s a lot of growth ahead of us. I don’t think we lack for growth opportunities in our core business.

What are the trends in the business right now?

TW: The one thing that is shaking up the industry right now is personalization. It’s becoming more of a standard for consumers. I think that increasingly, people are expecting that they should be able to personalize their radio channels. That combined with the increasing number of distribution points is a very powerful combination.

(Photo: courtesy Pandora)

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