Pandora sees traditional broadcasters as its main competition, but views as complementary such on-demand subscription Web services as those from Rdio, MOG, Spotify Ltd. and Rhapsody, from which listeners select particular tracks to play. Industry analyst Hanson equates such on-demand subscription services with private record collections of days gone by, noting that Pandora is more akin to listening to the radio. Music fans may wish to select a particular album on occasion (using a for-pay on-demand service), but at other times they’ll prefer an Internet radio service like Pandora, he suggests.
Pandora argues that its curated approach is a better fit for most listeners — even if some subscription services offer 11 million songs versus Pandora’s 900,000. “Our approach is different. We’re trying to find the best music in each genre to deliver a great radio experience. It’s far more about quality than quantity,” says Kennedy. People want to hear the best songs from an album, not all of the songs. “We let the thumb feedback be our guide. It’s greatly encouraging that with over 11 billion thumbs up and down, we still play 95 percent of our songs every month.”
Radio of the Future
Also crucial to its success, Pandora says, is its concentration on leveraging new technologies. “Today, 70 percent of our listeners use smartphones and nontraditional connected devices,” like portable tablets, adds Kennedy, “compared with just 12 percent two years ago.” Mobile networks also allow people to stream Internet radio in cars using smartphones. According to Kennedy, almost half of all radio listening is done behind the wheel. Starting with Ford Motor Co. (NYSE: F), automakers including GM, Honda Motor Co. Ltd. (NYSE: HMC) and Toyota Motor Corp. (NYSE: TM) now offer the ability to control the Pandora app in some of their latest vehicles.
READ UP ON THE INDUSTRY’S GROWTHIs Music in Turnaround Mode?
With all the attention on Pandora and with Kennedy taking over the day-to-day responsibilities, is Westergren now rubbing elbows with rock stars and hanging out backstage? Not exactly. Westergren travels the country and often conducts small, informal get-togethers with Pandora fans, as well as auditorium-size town-hall-style meetings. What the company founder really enjoys is hearing from listeners and lesser-known bands who say that more people now come to their shows after discovering them on Pandora.
“The most gratifying thing after all the tough times is seeing all these employees — we have over 400 now — and feeling the sense of purpose all around,” says Westergren, who calls himself “Pandora’s chief evangelist.”
Pandora reports that it already is the leading Internet radio service in the U.S., based on total number of listeners and the time they spend on the service. Although it would like to be global, current copyright law restricts the kind of service it offers to the U.S., without negotiating separate deals with labels in other countries.
Nevertheless, the company says it is always looking for more listeners and ways to expand its appeal, such as the recent inauguration of its commercial service. It is looking closely at giving its stations more local appeal without turning off listeners. Most ads are national today, for example, but Westergren and Kennedy see potential for local ads — as well as local music — that support community businesses.
In December Pandora kicked off another local initiative: free live concerts featuring emerging bands. The first concert of Southern California band Dawes was held in Portland, Ore., after the Music Genome Project suggested that area listeners are 25 percent more likely to enjoy a Dawes song and 30 percent more likely to create a Dawes station on Pandora than listeners in any other U.S. city. “Connecting artists and their fans is a central part of our mission at Pandora, and we bring some very unique capabilities to that task,” says Westergren.