Pandora’s Tim Westergren on revolutions in radio

Tim Westergren is having the time of his life. Not long ago he was a struggling musician, trying to earn a living traveling from town to town building a fan base one venue at a time. Today, he’s holding town hall meetings across the United States, lobbying congressmen on Capitol Hill, and negotiating high-stakes deals with the powerful Recording Industry Association of America (RIAA).

Oh, and revolutionising radio along the way.

“Revolution” is a term often overused in the technology industry, but when you see what Westergren is up to and recognise the potential it has to disrupt the traditional radio business, you get a sense this one might qualify.

Westergren is the chief strategic officer and founder of Pandora, the fledging internet radio service that began initially as a music e-commerce site 10 years ago, but in the last five years has blossomed into an internet radio phenomenon with over 65-million listeners.

“This is radio writ large,” as Westergren likes to say, whether talking to the Los Angeles Times, the Washington Post, TV personality Stephen Colbert or a group of listeners at Babb’s Coffee House in Fargo, N.D.

Westergren, 44, is like the Pied Piper of internet radio these days, appearing in dozens of newspapers, magazines, TV outlets and online interviews with his boyish good looks and his signature gray T-shirt, blue jeans and tennis shoes. He looks more like the laid-back jazz pianist he was and still is, if not the guy-next-door, than one of Time magazine’s most influential people of 2010.

“Radio is at the beginning of a period of extremely rapid change and I don’t think the traditional broadcast radio business knows that yet,” he said. “Technology is changing what radio means and what people’s expectations are.”

Pandora is like your favorite radio station on steroids, where you decide what you like — an artist, genre or theme — and they serve up that and more all subscription free. It involves discovery and “serendipity,” as Westergren says, and that is key to what distinguishes it from other music experiences.

You may have a thousand songs in your pocket with an iPod, but you aren’t getting regular recommendations for new music as you listen to your own library. You may be listening to internet radio, but you don’t have a bunch of people in a room somewhere helping deliver a more refined and personalised version of radio, based on the likes and dislikes of every song you hear.

Pandora uses a sophisticated template to define and “score” songs using distinct musical characteristics. Every song ends up with unique attributes — a musical DNA — that allows Pandora to serve up songs you may like based on your preferences. It’s a laborious process but it’s Pandora’s core strength; 800 000 songs are in the database and 10 000 new ones are added each month, all scored manually.

“Delivering targeted, personalised radio is incredibly hard to do,” Westergren said. “We try to make it look easy, but we have a decade of experience and 30 to 50 people doing it manually day in and day out,”

This unique algorithm and capability is what allows Pandora to deliver a highly personalised radio experience. And this mix is working across musical genres, attracting new people to the service at a rapid pace.

According to the New York Times, Pandora may generate something to the order of US$100 million in revenue this year from various advertising and licensing deals. Not bad for a company that has never advertised its service. But Westergren doesn’t like to talk about revenue and growth projections, preferring instead to focus on the artists, the experience and the listener.

Altruistic perhaps, but it hasn’t always been easy. Westergren started the Music Genome Project in 2000 as an e-commerce site making music recommendations just as the dot.com implosion happened. He found himself “wandering around in the wilderness,” often with no salary, searching for venture capital believers and trying to stay true to the music.

After re-launching as an internet radio site in 2005, Westergren almost pulled the plug a few years later due to a federal Copyright Royalty Board decision to double the performance royalty that Web radio stations pay to performers and record companies.

After mobilising listeners, orchestrating a grass roots campaign and getting a crash course in how to lobby Congress, the ruling was reversed and the company survived.

At a recent meeting in Portland, Oregon, Westergren displayed a graph showing the rapid growth in listeners just over the last year, from 49-million to 65-million. “Broadcast radio doesn’t really have an answer for this,” he said. “You can’t just take KFOG and make KFOG.com and stream it online because people are looking for something different, they are looking for a more personalized experience.”

As those listeners flock to Pandora, Westergren says broadcast radio is slowly losing share.

“I don’t think the broadcast industry really knows this is happening yet, but two years from now it’s going to look like a tornado hit,” he said at the Oregon meeting, and then paused to show a picture of an iPhone on the screen behind him. “And it’s because of this.”

Like so many other services, the iPhone has transformed Pandora’s business. According to Webcast Metrics the number of people listening to Pandora shot up 50 percent after the launch of the first iPhone App, and the company is now activating something on the order of 100 000 new listeners a day on smart phones alone.

“Overnight we went from a stationary computer-based experience to being radio, period,” he said. ” You could buy a US$3 jack and plug it into your car stereo and people began doing that. More than 50 percent of people who have iPhones have used Pandora in their cars, and that’s a big growth area for us.”

Indeed cars are the next “holy grail” for Pandora, and it’s easy to see why. According to Frost and Sullivan, internet radio is one of the biggest trends sweeping the automotive apps and services market. They estimate that the hybrid connected model — running apps off phones brought into the car vs. embedded — will have an addressable market size of more than 5-million units by 2015 in North America alone.

Aside from cars, Pandora is seemingly everywhere in consumer devices these days — from smart phones, HDTVs, Blu-ray disc players, dedicated Internet radio boxes, after-market car stereos and more. And Westergren says they are planning to add talk radio, sports and weather.

All of this means growth for Pandora, and potentially dire consequences for traditional broadcast and even satellite radio. He seems to enjoy the roll of disrupter, but Westergren says they are trying to stay true to the music, the artists, the personalisation and a simple business philosophy that grounds the company.

“The best way to run a business is to ask ‘why are you doing this?'” Westergren said. “We’re doing it because we want to be part of this musical revolution. We want to help people discover stuff and help artists find their audience. If all you do is chase money you can lose your identify and ultimately that will come back to bite you.”