September 18th, 2008
Pandora opens up: Q&A with Tim Westergren
In August, Pandora founder Tim Westergren told the Washington Post that the future could be bleak for the Internet radio station due to high percentage of its revenue being forced to go to royalty fees. Now, one month later, Westergren is shooting down rumors and socialsphere speculation about why Pandora is facing potential extinction.
“One of the falacies that is floating around is that Internet radio is poorly monetized — that is not true,” Westergren said. “We’re just being charged more than other forms of radio. At the current pace if we did our projected $23-$24 million this year we would be paying $17 million in royalty fees. That’s 70 percent of our revenue. Someone explain to me how that is fair when satellite radio is charged only about 7.5 percent for its music. It’s really ridiculous.”
The other rumors? Some bloggers have written that in order to survive Pandora needs to get more social, more akin to competitor Last.fm, which has a more interactive quality. But this issue isn’t about site traffic or a lack of reasons for advertisers to invest.
“Advertising is steady for us,” Westergren said. “And the commentary around our needing to be more social shows the ignorance in understanding the economics of Internet radio. Anyone who does Webcasting has these exact problems. I think we’re being more open about the challenge so people may think it’s use, and we’re also the largest pure play Internet radio station so we’re going to get more attention on this subject.”
Fired up about the issue but still holding steady ground, Westergren is deep in the trenches of leading Pandora’s negotiation with Sound Exchange, the entity that represents artists and record labels, but is understandably quiet on the current details.
“We’re currently still negotating and nothing material has changed, but we’re hopeful that all will be resolved in the negotation,” Westergren said.
The news of Pandora’s potential demise sent a shock through music lovers on the Web. Some even went as far to create an “I Heart Pandora” widget for people to show solidarity through their blogs and social network pages and several bloggers have written urging their readers to take action and urge Sound Exchange to settle in favor of Pandora and Internet radio. It was just 18 months ago when Westergren himself put out a call to Pandora listeners sign a petition urging their Congressional representatives to act in favor of Internet radio. Are those actions needed again? Maybe, but now isn’t the right time.
Next: Why listeners should hang tight…for now –>
Jennifer Leggio, aka "Mediaphyter," is passionate about all things social media, especially enterprise, security, privacy and reputation issues -- and what she calls "social business." She can usually be found on Twitter and FriendFeed and Facebook. See her full profile and disclosure of her industry affiliations.
| 09/29/08
