I was in Austin, Texas, last week for SXSW Interactive, where I had the chance to sit down with a number of tech industry execs for my video series Fast Forward. First up is Chris Becherer, VP of Product at streaming music service Pandora. We talked about new product development, the future of streaming music, and some of the challenges Pandora faces in the industry. Check out our chat in the video and transcript below.
Dan Costa: Let's start off with the news that you announced today which is that Pandora has a new premium product.
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Very big day for Pandora, very exciting. Yeah, just today we announced that Pandora Premium, which is our new $9.99 subscription tier that combines the best of personalized internet radio, which Pandora has set the standard for for many years as you know, with a full on-demand feature set. I used to run Product at Rdio, and I came over in the acquisition in late 2015, and since then we've been hard at work on redefining what a $10 music service should be. We've done that, and so, super excited to be rolling it out...to our entire user base over the next several weeks. Then you'll see a pretty big marketing campaign and a lot of cool exciting things throughout the spring, as we iterate on the product and make it even better.
Explain what on-demand features really include. People are used to subscribing to Pandora. It's basically an internet radio station. They don't have total control over what they're gong to hear next, but it tunes to their interests. Then you can pay $5 and get no advertisements. You're going a step beyond that.
That's correct. Pandora has been around for over 10 years. Traditionally known as a radio service, a personalized radio service. It has really set the standard for what a personalized radio service should be; that thumb up, thumb down, everybody's very familiar with that UI. Pandora pioneered that. Throughout those 10 years, we've built up a huge audience. We have 80 million monthly users here in the US. We have a hundred million quarterly users and we actually have 160 million people now in the US that have thumbed up at least one song. That's exactly half of America, latest census, 320 million, so exactly half of the country. We have some understanding of your taste.
Over the last couple years, so I say, "That's great," and not only is it a lot of people but they're listening a lot too, average of 22 hours a month. When you add up all that engagement across all of our listeners, we're the number one mobile app in terms of engagement in the US, which not a lot of people know; even more than Facebook. There's more engagement on Pandora than even Facebook.
Things have been great. We've grown this huge audience and really built a huge name for ourselves in music, but over the past few years, we have been hearing a lot more from our user base that they want control over the experience. They want more fine control over their listening. To respond to that, the company's been undergoing this transformation, mostly under the hood, over the last couple years and the Rdio acquisition was a part of that. Another huge part of that was doing direct deals with the record industry. Traditionally Pandora didn't have those, but now we have direct relationships and partnerships with all the publishers and all the record labels that enable us to do more interesting things in the product and through the features.
The first bits of that hit users last fall in the form of Pandora Plus. Pandora Plus launched in October, and Pandora Plus, $4.99, ad free, as you mentioned, but also the ability to replay songs and listen to music offline. Those features have been doing phenomenally well. Users love that additional control over radio, but we wanted to go beyond that. Really, all of that under the hood work that we've been doing has been to set the table for this moment which is pairing that awesome thumb up, thumb down personalized radio experience, which we still have, and Pandora Premium with the ability to listen to any song I want on demand, to create my own playlists so I can listen in whatever order I want, and build an experience that seamlessly transitions you between that lean back radio and that lean forward on demands.
No other service has really done that. Just about everybody else has thought of over here as a radio service, or over here as an on demand service, and so we have a lot of people that use Pandora very regularly that will go somewhere else to listen to a song on demand.
To bring all of those elements together into one package, you unlock more than the sum of its parts. There's a lot of cool things that happen when you go from radio to on demand and back. Everybody has the appetite for both. I think it used to be thought of in the industry that there was radio listeners, lean back people, casual, that didn't really want to curate their experience, and then hard core music nerds. In reality most people are somewhere on a spectrum.
That can change over the course of a night, over the course of a week.
Your context, right? Even the most hard core music fan every now and then is going to want to set it and forget it. They're going to want to turn on the radio and just let the machine do the work. If you're making dinner, if you're driving, something like that. On the other hand, my mom, who's a huge Pandora fan and has been for a long time, occasionally will want to listen to a specific Billie Holiday track, and, for the first time now with Pandora Premium, she can do that.
We think that users are on the spectrum. It changes on context, exactly how you said. We think Pandora Premium is the most flexible of the music experiences and the most simple, the easiest to use, so we can meet you wherever you are on that spectrum.
The streaming music market's super competitive, some giant competitors on the market, but it seems to me there's so much value in having that history, having all that data on the users' preferences and being able to customize the service in real time. How important is that data for Pandora and are there any things you can do with that data other than just make better radio stations?
A great question and it really hits at the hallmark differentiator of Pandora Premium. We think that ... I think it's generally accepted that we're the best at that song to song recommendations in radio, and we're leveraging all of that knowledge, all of that data, to do interesting things in Premium. If we break down what really are those competitive strengths, what is that when we say data, what do we mean?
We're really combining two big data sets. The first is all the data that we know about the musical universe. Coming from Rdio, this has been the thing that I've been most impressed with Pandora. We've been undertaking this effort called the Music Genome Project which you may have heard about. A 10-year effort to analyze millions and millions of songs based on over 450 different attributes. We have musicians, musicologists on staff with headphones all day long analyzing these songs in a much more nuanced way than a machine could. You get these really unusual but interesting song pairings based on that kind of analysis. We have a tremendous understanding of the music.
The second data set that we have is, what you're referring to, is this tremendous amount of data that we have on our users. We're now up to 75 billion thumbs recorded across all of Pandora, so far more signal than any other service has been able to accumulate, and so what that enables us to do is learn your tastes. We combine all of that interesting music genome project style analysis with everything we know about you, sprinkle on some data science on the top, and we can really come up with some interesting recommendations that other services can't compete with.
With Premium, what we want to do is take that out of the station and bring that into other places. I'll give you just one awesome example. Playlists are something that are very, very popular in on demand services. A playlist is different than a station. A station is never ending. It's steerable based on your thumbs. It's more like an old school radio station in that it just keeps going. A playlist is a more discrete finite package. You have control over the order. It's got a beginning, a middle, and an end. You can see all the tracks.
It's also got a social component where people can share playlists.
You can share playlists.
Sharing stations is not quite as unique.
A little different. Yeah, exactly. There is a personality in playlists that's a little bit different. Everybody wants to create playlists on these services. That's why many people subscribe to them, but building playlists is a lot of work for a lot of users. Especially the type of user that is really engaged in Pandora.
I never build playlists.
It's too much work. Interesting stat from Rdio, over 50 percent of our user generated playlists were fewer than five songs. We called them the playlist orphans. It makes sense. You come up with two or three tracks under a common theme, like work out, or study, or whatever it is, and then after that it starts to feel like work. You run out of steam. That playlist rots in your collection and it just slows everything down. We want to save the orphans. We're making playlists, not work lists, is one of our taglines for Pandora Premium.
My favorite feature, we have a couple features that help the effort of playlist creation, but my favorite one, which really speaks to what Pandora's all about, simplicity, effortlessness. We keep coming back to those two designs principles a lot. We want to be simple and effortless. We have a single button, which we can show you, a single button in the UI that, all you need is one song in a playlist; you hit this button called Add Similar Songs and Pandora will analyze every song in the playlist, whether it's one song or 300 songs, and will return a set of tracks that are relevant to the playlist but also personal to you, personalized to you.
If you've thumbed up or thumbed down a particular artist, even if it's relevant for that playlist, we still wouldn't put it in there. With just a few taps, you can quickly build a playlist. You can swipe to delete a few things. We're leveraging in a very direct way, the Music Genome Project and putting the power of all those algorithms and all that data analysis in your hands to curate exactly the way you want. Really, really cool feature.
I think it's great that we've got to this point in streaming music market where users know what they can get for free. They're going to have to suffer through some advertisements and everybody understands that, and they're willing to do that at one level. There's another group of users, much smaller, that will pay for the convenience of not having to listen to those ads. Premium's another attempt to get people to pay a little bit more for a little bit more control.
What are the things that are going to drive people to say pay $15 a month, or $20 a month, which is sort of where the industry needs to get in order to be sustainable.
Right. This something we talk about with our partners on the label side quite often, is what is the menu look like in the future? It's interesting to look where we've been. The $10 tier has been around for a long time. I remember using Rhapsody Premier when I was a grad student a long time ago, 12 years ago. The free service is built underneath that. I think what we've seen is that just those two options aren't enough options. Pandora Plus, $4.99, has been doing tremendously well of addressing ... It's not just ad free. That's kind of a misconception. There's a lot more there; being able to replay your favorite songs, listening to music on an airplane, things like that.
Which is huge. The reason I didn't move to Pandora earlier is because I commute every day and I'm underground and I need to listen to music. I need to be able to capture the stations. That feature alone was make or break.
Yeah. Have you tried that in Pandora Plus?
I have, yes.
We call it predictive offline, where we don't even force you to choose the stations. We just automatically determine what the right music to take offline for you and we refresh it every time you connect with the server; very elegant, very effortless implementation of offline.
That tier for sure has a place in the menu. The $10 tier, which people are familiar with, for sure has a place in the menu, as do things like family plans and student plans. Getting people in in a different way to try it. We've a really innovative trial with Pandora Premium where, if you're a Pandora Plus user, one of the $4.99 people, like you, you can try Premium for six months at no extra charge. You're seeing a lot more innovation across the board with different pricing and different trials. The question is, what would be the thing that would go higher? Certainly there's been some attempts to do that with Lossless Music. There's some services that are trying to go $15.
Not a lot of successful services.
Not a lot of successful services there, so we'll see. We're kind of on a wait and see on that one. We'll see how it goes. There's been a lot of studies that show, unless you're plugged in to some really high end audio equipment, that extra bit rate isn't really doing you that many more favors cause it takes up more space on your phone. It eats up your bandwidth, all that stuff. That's one option. You could imagine that, $15.00 for HD or something like that. I don't think it's going to be that. I think it'll be something more. Is there additional benefits? We own a ticketing company. Is there some additional benefits where we can bring in other parts of music, the live experience somehow? Maybe if you're on an annual plan, which is beneficial for us for a lot of reasons, is there a way we can bundle in some live experiences? Things like that.
I think you'll see some innovation there. I don't think the things you've seen yet are the ones that are going to work. Certainly the music industry wants to keep growing this menu, so for every user there's ... choice is good, and for every user there's a plan for you that works. We'll see where it goes.
I always felt all my music services know that I'm a big fan of Lucero, one of my favorite bands, and yet in order to find out when they're playing I need to type the names into a search box and find out when they're coming in my neighborhood, and then I miss them because I don't pay that much attention. The radio station should tell me. They know that I'm into this band.
I would be grateful for them to give me, first of all, just to tell me that they're playing, and then to give me discount or let me get into the show early the way Amex does.
It just seems like there's a lot of opportunities there.
Yes, and we're really thinking about that very deeply right now. We bought Ticketfly, which is a huge ticketing service. They have a ton of awesome venues across America. We are testing a bunch of different things. One thing that we now have in the app, which I could show you, is if you go to the artist page in Premium of your favorite band, and they're on tour, we'll give you a little notification that they're on tour and we will let you actually route through and purchase the ticket in a web view without leaving Pandora.
That's kind of a start. We actually did something similar at Rdio but we have much bigger plans of how we can really kind of integrate that Ticketfly data that we have in all the Ticketfly service into the Pandora experience. I totally agree with you. We will start sending you notifications. We're already doing that a little bit today, but we've got more plans for that. When the band announces a tour, if it's somebody that we think you like, we'll send you a notification. Like you said, that's a real value add ad. It's kind of like an advertisement but it's helpful information too.
The trick is different artists will play in different venues that are run by different promotions companies, so it's not like everything goes through the same pipeline. It's a little hard sometimes.
Every dealer has to be cut separately.
Everything's a little different. We're definitely working on it. We want that. I mean, I want to do more things too where we're bringing back some live experience back into the product. Let's say you go see Lucero show and you love it. We'd love to have a set list waiting for you in Pandora Premium the next day. We're thinking about a lot of cool ideas like that. Again, the Ticketfly integration really helps. We started with some simple notifications but you're going to see that get a lot more interesting.
The other thing we have that we love, nobody else is doing this, is something we call artist audio messages. What artists can do, and we have actually a tent across the street where we're having artists come in and record these, artists can, using the Pandora app, the same Pandora app that we have, they have some different buttons that they're verified artists, they can record a message into their phone and it could be anything they want, but usually when they're doing it is when they're on tour. They can geo target that message to play on their station only for users that are listening in those areas. If they have a tour coming up, they're like, "Hey, Portland, we're coming to you next week. Come check us out." The listener is hearing that artist's radio station and then the artist is peppering in, from their own voice, a message for, an ad essentially, for their show and we don't charge them to do that. That's just something-
You're just bypassing local radio stations. All of those processes just get taken out and they can talk directly to their fans through Pandora.
Exactly right. What could be more direct? It's literally phone to phone. We get some really, really cool artist messages that are about the songs that the artist wrote, or about how the band was formed, things like that, but we're seeing more and more for shows and the artist can actually embed a link so, while the user is hearing the audio message, the user will see a link that would drive to purchase the ticket. If it's a Ticketfly venue it can all happen right there without leaving the now playing view. It's coming together but it's just a complicated ecosystem to get all the different pieces in place.
Interesting. You're the product guy. I think one of the most interesting things to happen to streaming music is that it's been enabled by these voice driven interfaces in the home, Alexa, Google Home. Pandora's on all these platforms, usually at launch, which I gotta think is a huge advantage because you're building that user behavior and those habits, and that's really a space that, I mean you could always use a Bluetooth speaker and send your signal to your speaker, but it's a lot easier when you just ask it to play Billie Holiday, and it starts playing Pandora's Billie Holiday station.
Exactly. Super exciting. The success of the Echo has really just been very interesting to watch. Obviously that's more than a device, that's a platform, and you see all the different Alexa integrations that people are picking up now. We're very, very interested because radio, there's so many situations where something like that pairs really well with radio, when you're driving. Driving has always been a really tough challenge for the streaming designers. All of us in the design community that have been growing up with streaming music, cars always been really tough because, of course people want to listen to music in their car, but no one wants to be twiddling around with little buttons and there's regulatory issues, and do you do a totally different UI? What's the right thing to do there?
One thing that really, really helps is voice in a car. LivingRoom, I think is really similar, is you're in the living room, you don't always have your phone on you. You're playing music collaboratively with your family. That's just another place-
That collaborative nature is also something that didn't really exist before.
It was terminal based. One terminal, one request and now people argue, the genres switch from song to song.
Who owns the Alexa? Who's Alexa listening to? Yeah. Exactly. I think that music is such a great category for those types of devices. You're going to see a ton of innovation there. You're exactly right. We're getting a ton of listening on those platforms. CE in fact, Consumer Electronics is our fastest growing category of platforms. It's really, really taken off in the last couple years. I think what will be interesting, cause the knock on Echo and Google Home and some of these devices, is the audio quality isn't all that great. For a lot of users that doesn't matter. We were talking about before, high end bit rates, that's a niche thing, but I do think that there's still a pretty big difference in audio quality from something like an Echo to something like a Sonos.
What I think will be really cool is when we start seeing voice and quality come together a bit more, where you can have a system that's really effortless, really easy to use, pulling your Pandora all of your stations, all your personalization, and it sounds great. I think we're going to see that very soon. That's very exciting, but huge category for us and one you'll see us continue to invest in.
All right. I want to be respectful of your time. I've got a couple more questions. These are my standard questions I ask all my guests. In terms of looking into the future, what are you most concerned about in the music industry and in the streaming industry? What are the things that keep you up at night? I gotta think it's about licensing.
Actually, yeah, that is one of them. One of them is certainly it's a very competitive market. It's a competitive market that we're facing some big boys. I worked at Apple for a long time. I know how powerful some of those players are. I really believe that Pandora has a different approach. The fact that we've been able to build up a hundred million quarterly actives that are listening and engaging with the app more than any other service, there's something special there. I really do think the same thing that made it special in radio is going to make it special in on demand and I inherently believe that on demand is a really wide mass market opportunity. Not everyone thinks that. It's like, "Oh, how many people really going to pay for it?" But when you really understand the value of all the world's music at your fingertips, organized in ways that are useful, that works on many devices, that are really ubiquitous; I mean $10.00 is a very fair price for that. I feel very bullish about Pandora's chances there, but competition is tough.
On the licensing side, you're right. There is some fears there a little bit, just because we have a lot of power in the hands of a handful of labels. They're awesome partners. We really enjoyed working with them, but it is a different type of product to build when you have a stakeholder like that. There's three or four different companies that we really need to be in cahoots with, where if you're building a photo sharing app you don't really have that extra stakeholder. So they are a partner, but also a stakeholder and it's one that we have to ... It's a new muscle for Pandora to learn how to work together with an industry like that. We'll see how that goes. So far it's been off to a great start, but that's something that we're all going to have to continue to grow into.
If you had one service product or gadget that you use every day that's totally changed your life, what would it be, not including Pandora or Rdio?
I wish I had a more creative answer but ride sharing services and apartment sharing services, I think have really expanded what the on demand economy can mean. I live in San Francisco. Pandora's over in Oakland. More times than I should, I'm taking a lift over, an Uber over there and I just think it's been fascinating to watch that transformation. We don't have those services here in Austin, and you really feel that cut off feeling of not being able to get around.
What we do have here is Airbnb and there's a group of us staying in this awesome Airbnb down the street that we'd never have found before those types of services. I'm interested in watching that whole category, whether it's transportation, or accommodations, or parking, or apartment rentals. I think there's a lot of interesting things that will happen in that on demand, crowd sourced, shared economy.
Very cool. If listeners want to get in touch with you, follow what you're doing, following what Pandora's doing, how can they find you online?
You can find me on Twitter, find me on all the socials. It's always my last name. I've got an unusual last name so I kind of own the space there. It's just @Becherer on Twitter, Becherer on Facebook. I have Becherer pretty much everywhere.
Chris, Thanks so much for taking the time. I appreciate it.
I really enjoyed it. Thank you.
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