The Genius Behind Pandora

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Earlier this week, I watched a live discussion by Tim Westergren, Founder of Pandora, discuss the backbone of the business, how it was conceived, and the future vision for the organization.  Pandora is on course to become one of the biggest online musical enterprises, and here is why:

  • Pandora allows the creation of customized radio stations by matching songs with similar qualities delivering personalized recommendations
  • Behind Facebook and Twitter, Pandora is one the largest growing websites with 50k users signing up per day
  • Over 600k songs catalogued in their database
  • Pandora is now available via mobile with about 4 million iPhone users alone
  • 40% of users listen to Pandora in the car bypassing broadcast radio completely
  • 70% of catalogued songs are from independent artists
  • Business model around advertising more strategically tailored to demographic and audience, which means users will receive ads that are more relevant
  • Pandora’s success has grown because of word of mouth; the company has never advertised according to Westergren

I have written about the issues of the music industry and my love for Pandora.  After listening about the company and its future vision, I have an even a greater appreciation for it.

For starters, I learned several weeks back that employee’s volunteer once a month and teach lessons.  That alone is enough for me to be loyal to the company and what it represents. Plus, I love the fact that Pandora is operated by professionally trained musicians.

On the back end, an analyst will go through a song, and select from several menus measuring the song by evaluating characteristics about it. Westergrin described the evaluation process as understanding the musicology of the song and how a human interprets that song with measurable characteristics associated with it.  The goal is to measure a song with characteristics such as melody, rhythm, style, genre, length, etc., rather than determine if it is good or bad.

The Engine

If you are not a Pandora user, then I encourage you to give it a try.  The Pandora engine works by creating a “station” by entering a song or artist, like One from Metallica, and Pandora automatically generates song recommendations that are matched with the qualities of Metallica and/or One.

As songs are streamed, the user can give it a thumbs up or down to notify Pandora whether the song suggestion is good or bad.  This type of interaction leads to individualized recommendations based on personal preferences by radio station. (Yes, you can have up to 99 radio stations.)

What this also means is that you have greater potential to learn of new artists because of your musical tastes.  I can honestly say that I have encountered new artists through Pandora that led to purchases.  The key to any successful business is finding the right audience, or with regard to music, the right listeners.  It just makes common sense. The genius behind this system is that it matches unknown artists with known artists based on song qualities giving control to the each listener versus a label.  Brilliant!

What This Means For Musicians

If you are musician searching for an audience, then Pandora should be on your “to do” list.  If you have a sound recording available, then it is a MUST to send your music to Pandora.  Considering that Pandora’s online catalog comprises 70% of independent artists, it seems a major mistake to not take advantage of this opportunity. Any artist can submit their sound recording, which will be added to the database within approximately 6 weeks.

However, once a recording is sent to Pandora, it is imperative to sign up for a Sound Exchange. The current law stipulates that music played through online radio have performance fee rights.  Sound Exchange tracks music played online and manages all financial transactions or royalties to artists. According to Westergren, over 50% of Sound Exchange fees go unclaimed.  I don’t know of any musician that would turn down performance income other than not understanding the facts.  Once again, another no brainer.

The Future

Pandora has plenty of room to grow.  For starters, because of licensing issues, Pandora is currently available in the US only. One of the long term goals for the organization is to expand internationally.  I can only imagine how people overseas will respond to the service.  Early on, Pandora was available in certain parts of Europe and had to be switched off because of licensing.  Once licensing issues are settled and a blueprint is agreed upon in the US, the intent is to use the blueprint to reactivate service overseas and expand into new territories.

Because the entire catalogue is digitized and information must be kept, the opportunity and part of the business plan is to provide access to musicians to see how listeners are responding to their music.  This would allow musicians to strategically plan gigs in regions where the artist is more popular.

One really cool feature in the works is to provide concert information as people listen to music. This would be extremely beneficial to independent artists.  Another service, iLike include information but they do not have a sophisticated radio interface like Pandora.  However, iLike includes concert information an notifies users when artist has scheduled a concert in your area. Combining these two services seems like a match made in heaven. What a brilliant way to discover new music and matching listeners with live performance opportunities.

Needless to say, Pandora rocks!!

I have to send special thanks to Artists House for housing the live feed and delivering great content.  For anyone unfamiliar with this blog, it is great and I highly recommend it.

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