Pandora Will Rock Radio As We Know It

(AP Photo/Jeff Chiu)

Tim Westergren, chief strategy officer and founder of Pandora, stopped by Portfolio yesterday and talked to our staff about the future of his online radio company. He's working to eventually take Pandora public and describes its growth as linear, with half a million new users each month, capturing a total of .2% of radio listeners in the U.S. Pandora sets itself apart from other internet radio sites by allowing users to personalize their own radio stations through a 'music genome' that analyzes songs for rhythm, lyrics, genre, etc. and then feeds similar songs into the user's play list.

Though this is a great way to discover new artists and appreciate ones you never thought you would, as one Portfolio staffer pointed out, play lists can tend to sound homogeneous sometimes. But Westergren assures that there are ways of mixing up one's radio selection. "The secret sauce is that people interact a lot with Pandora."

Users can give a recommended tune a thumb up or a thumb down, and they can also learn how their play list was selected for them. To expand on the user interaction the company right now is considering ways to incorporate into the site elements of online social-networking.

In terms of how Pandora is shaping the future of music, Westergren says, "We're going to create a musicians' middle class," adding that the vast majority of music is created by unsigned artists. Westergren himself is a musician and his Yellowwood Junction once had a strong following in the western U.S.

By using Pandora, bands can find out where people live who listen to their music and send out alerts notifying them of tour dates and performances. Westergren even noted how hobbyists who mailed CDs into Pandora got their music included in the site's massive library of songs. It's one big free for all for artists and fans alike and the number of songs and genres available on Pandora keeps on growing; classical music will soon be available in the coming weeks.

Profits for the site come from visual advertising. "Music is not a subscription business," says Westergren. He emphasized the shift of advertising money to the internet and how it's changing the music industry. He even predicts that soon Clear Channel, with its monopoly on traditional radio stations, will soon get a rude awakening with the advance of internet radio. Pandora doesn't do any of its own advertising, and Westergren credits the half a million new users a month to word of mouth and the blogosphere. "Catch a wave of the bloggers and it explodes from there."

To grow Pandora right now the company has a partnership with Sprint to provide its service on Sprint cell phones for $2.99 a month and more deals with major cell phone companies are in the works. With its growing success, Pandora continues to stand by its original intent: support the music industry by giving air time to all kinds of artists. But it suffered a major hiccup with the Copyright Royalty Board ruling on content licensing and now can only provide service to users in the U.S., enforcing this by checking zipcodes against a user's IP address. Westergren's solution to fight illegal downloading? "If you give someone a service that satisfies and gives them what they want, they won't steal."

--Kevin Maney and Christine Lenzo ...