In the flurry of words written about Pandora over the past months and years, people tend to forget what it actually is.
Pandora is not a social media company, although you might think otherwise reading some financial magazines. It’s not an Internet company in the typical sense. Pandora is a radio company. And soon it could have a radio CEO.
Pandora CEO Joe Kennedy announced Thursday he will be leaving the company. No timetable was given. Kennedy was President and Chief Operating Officer at E-LOAN prior to joining Pandora in 2004. Before that he was VP of Sales, Services and Marketing for Saturn Corporation. Kennedy built a radio company without any experience in radio.
In another sign that Pandora has entered a new phase, the company got a new CFO last month. Previous CFO Steve Cakebread was hired in March 2010 to help usher Pandora through its June 2011 IPO (he was CFO when Salesforce.com had its IPO). New CFO Michael Herring was previous a VP of Operations at Adobe and held executive positions at Omniture and MyFamily.com (now Ancestry.com).
Now Pandora needs a CEO that can help it solidify its identity as a radio company – and make no mistake, that’s what it is. It hires radio ad sales people away from its broadcast radio competitors. It goes after radio advertising dollars. It speaks in radio metrics like “average quarter hour.” It even has the cost structure of a radio company rather than a social media company.
A prospective Pandora CEO would need to have both network and local radio success because Pandora has both national and local characteristics. He or she would need experience leading a radio or media company. If the Pandora board is looking at people in the radio world, it’s looking at a short list.
One former radio executive tells Billboard that former SiriusXM CEO and longtime media executive Mel Karmazin would be a good choice to lead Pandora. “He is the smartest media executive I have ever known,” this person says. He also believes Dan Mason, president and CEO of CBS Radio, who is a Karmazin protégé, would make a good choice, but he doesn’t think the Pandora board should opt for two other Karmazin protégés: Farid Suleman, chairman and CEO of Citadel, or Joel Hollander, former CEO of CBS Radio. “Mel’s magic did not rub off on them.”
Karmazin would be an interesting pick. He left SiriusXM in December, two months ahead of his scheduled February departure. A former CEO of CBS Radio, Karmazin is certainly a rare caliber of media executive and has been able to attract both advertisers and top-shelf talent. Pandora needs advertisers, but the algorithm-driven service needs no on-air radio talent (not yet, at least).
However, at 69 Karmazin may not fit Pandora’s youthful company culture. In addition, he had publicly been at odds with the free Internet radio business model while CEO of SiriusXM, a subscription satellite radio service. In a November SiriusXM earnings call Karmazin called Pandora’s business model a “race to the bottom in terms of business model” because “those companies which can grow users and provide good customer experience usually have the worst business models.” Fixing the business model would require “a whole lot more commercials, and that means harming the customer’s experience.”
Pandora has taken other approaches to address its costs rather than play more commercials. The company has supported legislation — last year’s Internet Radio Fairness Act — that could reduce its royalty burden. Last week it implemented a cap on mobile usage that prevents users from listening to more than 40 hours per month on mobile devices. Additional listening can be acquired for 99 cents for the remainder of the month through an in-app purchase.
Whether or not Pandora takes a veteran radio executive or a younger media executive, the company is likely to take a person capable of helping it become a radio giant — a profitable radio giant.