Pandora CEO Tim Westergren Talks Sales Rumors, Expansion, Cheaper On-Demand Subscriptions
Pandora has seen a lot of ups and downs throughout its history, possibly none more dramatic than in the past year. While it has managed to ease its long-contentious relations with the music industry, striking direct deals with several key stakeholders, the company's listenership has remained static at around 81 million; it faces even greater competition than ever with the recent launches or upgrades of Apple Music, Tidal and SoundCloud; and it continues to lose substantial amounts of money. In the first quarter of 2016, consolidated adjusted EBITDA was a loss of $57.4 million, compared to a loss of $20.9 million in the same quarter last year, according to the company’s most recent financial report.
Rumors have also been rampant that it is for sale or merging with another business.
But founding CEO Tim Westergren, back at the helm after Brian McAndrews’ two-and-a-half year run, is working to build Pandora business beyond its radio model to include an on-demand service, purchasing pieces of Rdio last year and expecting to roll out a streaming service that sources say will be dramatically different from the others. Pandora hopes to become a single music portal for fans, one where they can immediately find the latest videos, concert streams, TV appearances, tour dates and more, as well as receiving recommendations from its Music Genome system. Throughout, Pandora will leverage its knowledge of where listeners are hearing music, the time of day, and how they’re listening, whether on their phones or a home system. “I think that doubles or triples the size of the music business if listeners don’t have to work to find those things,” a company source tells Billboard. “We’ve been under-serving the relationship between artist and fan.” They also plan to launch a major PR campaign.
At the MIDEM conference in France on Saturday, Westergren sat down with Glassnote Records founder Daniel Glass -- an unabashed Pandora booster whose company has worked extensively with the service -- for a half-hour chat. In it, Westergren talked about the company’s expansion plans, both internationally and in terms of its product, his goal to have a subscription service for less than the industry standard of $10 per month, and those sale rumors. Edited highlights follow, and the entire conversation can be seen below.
Glass: Let’s get this out of the way: Is Pandora for sale or merging [with another company]?
Westergren: We are on a path to do something big and something for the long term, and that’s why I got back in the saddle. So [there are] no plans for that. [Note: After the keynote, a Pandora rep sent Billboard the company’s official statement on these sale rumors, which reads in full: “Pandora is on the cusp of realizing an extraordinary vision: fundamentally changing the way listeners discover and enjoy music, and the way artists build and sustain their careers. Pandora has a profitable core business, combined with a strong balance sheet. We are confidently investing to fully capture the massive opportunity ahead of us. Our management team is in constant dialogue with shareholders about our business strategy and committed to delivering results and long-term value.”]
On-demand: why are you doing it and how is it going to work?
We’ve been focused for ten years on this lean-back radio experience, and that’s been our maniacal focus, and building a business around it. But we realized there’s an opportunity for us to take this audience and do something more with them -- it’s an audience that’s so engaged and about which we know so much, their station history and behavior on the platform, and we’re uniquely positioned to look at these people who aren’t paying for the service and [figure out] how can we entice them into subscribing to something with more capabilities. We’re uniquely situated to do that, and not in the way everybody else is -- which is 30 million songs and a search box and "good f---in' luck." That’s not our approach -- our approach is going to be to take what we know about you to make it intuitive and personalized, which will cause you to actually engage with it and educate people about the value of it. I think it will be a [benefit] to the industry in a way that nobody else can do, so we bought Rdio to do it.
And people will pay for it?
Hopefully multiple tiers, not just $10 per month but something lower as well. I think the big challenge is there’s a small segment of the population that will pay the $120 per year, but we think there’s a much bigger audience that will pay maybe something less for mid-level features and that’s our thesis going into it.
Advertising vs. subscription: will you be in both in two years?
Absolutely, we already have a subscription product, about 4 million subscribers that pay just to get rid of ads. But looking ahead we think a substantial [number] will be subscribers to a more on-demand interactive service. One truism about music consumption in general is people will lean back because it’s super easy, more of a background experience -- you don’t tend to want to curate your experience most of the time. But we’ve decided we want you all the time, not just when you’re leaning back. Now when you hear a song on Pandora you love and you want to hear it again, you go to YouTube primarily -- we want you to stay on Pandora.
Now Pandora is just available in the U.S., Australia and New Zealand. Give us a hint, what might be next?
Oh boy, I don’t think I can say that publicly but we’ve taken the entire globe and rank-ordered every country based on dozens and dozens of factors -- you could probably guess the first ten. We’d like for this to be everywhere.
What drives you crazy?
I guess what drives me crazy is that there’s a substantial part of the digital music world that is educating listeners to believe they can get music for free and on-demand, and it takes the form of unlimited free trials, it takes the form of poorly monetized on-demand services, so you’re not really paying the price as a consumer for having that music. And it’s not good, not just in terms of the revenue it doesn’t generate but it also in teaching bad habits. So that puts a lot of pressure on companies and we’re one of them in terms of trying to build a real business. I think the industry really needs to get its hands on that quickly before it gets out [too far] -- it will be hard to get it back in.