“My dream is that when teenagers tell their parents they want a career in music, those parents won’t be horrified and wonder where they went wrong, but say ‘Great, that’s a solid career’”
- Pandora founder Tim Westergren at the first Melbourne Pandora Town Hall event on Tuesday 11 December 2012
2013 will no doubt see the quest for music platform dominance between Pandora, Spotify and (possibly) the new MySpace as we increasingly turn to smartphones and online for music inspiration. Did someone say iTunes? No? Good. Probably too busy downloading that new update that doesn’t change anything.
So what does Pandora bring to the table? It distinguishes itself by allowing you to create your very own personalised radio station, learn what music you like through a thumbs up/thumbs down function, and introduce you to a whole lot of artists you never knew you liked. It has no concept of genre, user connections or ratings. It doesn’t care what other people who like Coldplay also like. Having manually analysed 400 musical structures present in the songs you like for a catalogue of hundreds of thousands of songs, it plays other songs that possess similar musical traits.
In a frank and open Town Hall session to coincide with the Australian launch of the Pandora app, we learnt a lot about the founder, the organisation, and the Pandora employees who went two years without pay to get their version of internet radio off the ground.
Because, according to Tim Westergren, internet radio is the future.
1. WHAT DO MOVIES AND MUSIC HAVE IN COMMON? Taste. As a musician, Tim spent five years scoring film soundtracks, and in the process discovered the key to success in this job was understanding the personal music taste of the director. There, the hint of an idea was born.
2. PEOPLE DON’T WANT TO PAY FOR STUFF. We already know this, but a good reminder. Pandora was originally introduced in a format that allowed the free listening for the first 10 hours per month, and after this you had to pay $3 per month for unlimited hours. They thought that was pretty reasonable. So what happened? People listened up to 10 hours then stopped, until the next month resumed. They do have a freemium model now, whereby the free version includes some advertising between songs, and the premium model which has no advertising. Of 175 million users, only one million have opted for the paid subscription, so advertising is by far the biggest revenue stream.
3. RUNNING A START UP REQUIRES INCREDIBLE DEDICATION…and belief in what you are doing. After an initial round of funding from venture capitalists, the money ran out and 50 Pandora staff worked TWO YEARS without getting paid (it’s actually illegal to defer payment of staff, although they didn’t know that at the time and could have gone to jail). Tim was $250,000 in debt to family and friends, had 11 maxed out credits card to a value of $120,000, and the dotcom bubble had burst. They hung in there for three uncertain years, until finally getting another round of funding and back-paying all staff in full.
4. THE BEATLES AND THE BEE GEES? After nine months of painstakingly working out an algorithm to analyse 10,000 songs, the team tested the program on – what else – a Beatles song. And the Pandora algorithm played… a Bee Gees song. They were devastated until they realised that early Bee Gees were really just a knock-off Beatles band, and even shared a producer. When they listened to the song they realised it was actually a very good match.
5. EVERYONE LIVES IN BEVERLY HILLS: Except not. Pandora initially only had license to stream music in America, so on signing up you had to enter your US Zip Code. So what are foreigners to do? Enter the only zip code they know, and that explains why the majority of Pandora uses were from 90210. When it became obvious that people outside the US were using Pandora, there was pressure to introduce IP filters and shut off foreign users. This is why Pandora was available in Australia before we were blocked some years ago.
6. YUGOSLAVIA HEARTS PANDORA: Tim said the saddest email he received after other countries were shut out was from a man in Yugoslavia who lived in a town of 300 people. They had little access to new music, and so every Saturday night was “Pandora Night”. Everyone would gather in the town’s one club, and listened to their own Pandora station, which they finessed and added to every week. The town was devastated they could no longer have these community nights, and Tim looks forward to the day when Pandora will be available everywhere.
7. THE iPHONE APP CHANGED THE GAME: Originally Pandora use was tied directly to office hours. People used it between 9am and 5pm Monday to Friday…and that was it. Since the app launch (initially iPhone only) it not only doubled the sign up rate (to about 40,000 per day) people were listening at all hours, and plugging their phones into speakers and cars so everyone could listen to it. Now their most popular times are Friday and Saturday nights
8. HOW THEY SOURCE MUSIC: There are three ways. 1) A team crawling the net looking at charts and trends. 2) Direct musician submissions. They listen to every song submitted, no matter how rough, and their curators make the decision to include or not. 3) Listener suggestions, and search failures. If people search for a band or a song and it isn’t there, they will make a note of this and look it up so they’re not missing anything.
9. THEY RESPOND TO EVERYONE: I can vouch for this as Tim personally responded to my multiple emails adding people to the RSVP list. They get 70,000 to 80,000 emails a week and have a team to respond to every single line of communication. This is similar to Pinterest in the level of personal interaction driving an engaged community and improve the product. While it may take time, in both cases it has definitely worked.
10. DAMN BECK AND FRANK ZAPPA: They are apparently the hardest musicians to build a station around as their songs are so inconsistent. They use the ‘thumbs up’ and ‘thumbs down’ to essentially crowd source what people are responding for these artists so they can still deliver the right songs. They really pay attention to this data, and will increase and reduce its usage based on this simple feedback.
11. FIRST AUSTRALIA, THEN THE WORLD: One thing you may not know about Mandy – she lies. There’s 11 things. Tim’s first Town Hall meeting in New York saw two people show up. But he persisted and more than 1,000 attended his most recent. Pandora is now available in USA, Australia and NZ, and they want to include more local and international bands (they are researching Melbourne talent as we speak). They are working towards creating “Pandora for artists” pages which musicians can use to find out which songs get the most thumbs up, which postcodes are the most popular so they can arrange tours, and potentially email those users directly (through Pandora) to notify fans that they are coming to town. Unknown bands have had great success with this, with one band in LA seeing 3,000 people attend when they previously struggled to get 30.
12. $250 MILLION PAID IN ROYALTIES THIS YEAR: What? I already told you that I lie. There’s actually 12 things. Bands like Coldplay and Adele will obviously take the lions share with $1 million each, but more than 2,000 bands will receive $10,000 this year, and relative unknowns like French Montana will receive $138,567.
It is a great way to discover new music, independent bands, and Tim hopes it will create a “music middle class” whereby bands and musicians can make a comfortable living without needing to sign with a major record label, be on traditional radio rotation and have a multi-million dollar promotional push behind them.
While it is great exposure, artists are paid a flat rate pro rata based on the number of times their song is played, and while $250 million sound like a lot, with 175 million users, that’s spread pretty thin. Most artists will still have to rely on touring, merchandise etc to make supplementary money, and exposure on Pandora will help with this, but music in general definitely doesn’t bring in the kind of money (we like to think) it used to.