Mobility is key to Internet radio

Tim Westergren founded the Internet radio station Pandora (www.pandora.com) in the spring of 2000, at the height of the dot-com bust. Despite some lean early years, Pandora now has an estimated 25 million listeners. It has attracted an audience by using an elaborate system of codes -- Westergren refers to it as the Music Genome Project -- that allows users to find songs comparable to songs they already like based on shared characteristics such as instrumentation, tempo and tonality.

Westergren worked as a musician and composer working with independent filmmakers before founding Pandora.

He gave a series of talks about music and technology at Wake Forest University yesterday. We talked to him during his visit about the state of digital music and what the future may hold.

Q. Where did the idea for Pandora came from and what can next-generation entrepreneurs learn from your example?

A. Don't launch a company in March 2000, that's one.

I spent a lot of years, touring, living out of vans, doing that whole working-musician thing. And so became very aware of and interested in the plight of the working musician.

When you write music for movies, it's a very calculated, deliberate form of composing, you think about songs very musicologically, you construct them to achieve a certain objective. And you're also trying to please a filmmaker, so you also get pretty good at understanding what someone likes and doesn't like.

So I had sort of an informal genome in my brain. Really, I put that together with the idea of discovery and working musicians and thought, you know, if I could kind of bottle this taste profiling that I did, and marry it to technology, it could become a really cool tool to get people from Bruce Springsteen to the next 100 Bruce Springsteens they don't know about.

Q. What do you think is the future of Internet radio?

A. I think it will be the pre-eminent form of radio going forward, and I think partly because it's getting off the (personal computer). It's moving into mobile devices, so it's accessible in a lot of places that were once the sole domain of broadcast radio, like cars.

Our peak listening used to be 9 to 5, now it's 8 to 6, because people are commuting with it. And I think that the advantages that Internet radio offers -- the ability to personalize and to give people feedback -- that gives it a lot of advantages over broadcast radio.

Q. How do you see the move away from personal computers as changing what you do and how people will be getting music in the future?

A. We have like 4-and-a-half million people on the (Apple) iPhone now, we add about 20,000 a day. Seventy-five percent of them are new to Pandora, which was shocking to me.

I think what that tells you is that there is an enormous audience out there who come to things from mobile devices. It's how they learn of things, it's how they first adopt them. It's how they become habitual.

For us, I think, historically the biggest problem for not only people learning about Pandora and learning how to use it regularly, making it part of their daily habit, is that it was only available on computer. For a lot of people, the computer is just not the place you go to listen to the radio. A phone is kind of like a Walkman now, and for a lot of people, their phone is like their portable everything.

Q. What is the business model for artists as consumers move away from CDs and other physical forms of records in favor of downloads?

A. I think what you're going to see is more of a diverse transaction. I think in an ideal world, a band will have, say, a half a million fans. Call them patrons. Folks who are willing to contribute something to the band, to make sure that band keeps making records. And they'll do that by buying singles, some will buy CDs, some will buy vinyl, some will subscribe to special behind-the-scenes video band information, some of them will spend time on the band's blog to generate advertising revenue.

Q. If you were going to start from scratch, how would you draw up regulations governing digital music? How would it be different from what those regulations are now?

A. The DMCA (the Digital Millennium Copyright Act, the law that governs the dissemination of copyrighted works online) in its intent, I think is the right answer. Among other things, it allows a service like ours access to literally tens of thousands of artists that we'd never include if we had to go find them individually to get permission.

The problem we're experiencing right now is there's an attempt to establish an absolute value of what a song should cost to stream on a radio station.

The battle that's been raging in the last couple of years is, what is the per-song performance fee. And they're establishing it as some fraction of a penny. And it's pretty expensive fee in the scheme of the economics of Web radio.

I think the industry would be much better served by a licensing structure that's based on a percent of revenue as opposed to a per-song minimum streaming fee. So let businesses grow and build and as they succeed take a percentage of it.

■ Paul Garber can be reached at 727-7327 or at pgarber@wsjournal.com.