How Pandora hit reset and became a success

Bambi Francisco Roizen · June 2, 2009 · Short URL:

Pandora CEO Joe Kennedy: It's uncommon that the founding idea is right on the money

In this segment of Lessons Learned, Bambi Francisco interviewed Joe Kennedy, CEO of Pandora, a personalized radio station that creates music stations based on personal preferences.

BF: You started Pandora when it was Savage Beast Technologies and there were 12 people there at the time. You were actually undergoing a restart. Many people are nervous about starting a company and having to hit the reset button. But it was a good thing for Pandora. 

JK: Pandora is a recapitalization, or revision, which started in January of 2000. There still is a core music genome project that is still a part of that. But the core business is entirely different. One piece of advice that I would give to entrepreneurs is that it is incredibly common that it's very rare that the founding idea turns out to be right on the money. There are almost always pretty considerable twists and turns. That's just part of the reality.

BF: So you shouldn't fear a restart or a recap.

JK: I wouldn't fear it. I'd expect it. You need to keep your eyes open on what is working and what is not working in the earliest stages of the game. There is a great paradox in that your greatest capability as a young company is that you need to be maniacally focused on one thing and be better than the rest of the world but every once in a while you need to ask yourself if you're really on the right track. You need to make some course corrections. But at the same time, you need to maintain focus and not scattered into four things. You've got to maintain being focused and periodically have perspective about what's working and what isn't working and make the coarse correction.

BF: But be nimble...

JK: To be nimble and focused at the same time is the challenge.

BF: I know you weren't there in 2000, but went wrong from the start? What was the lesson behind Savage Beast Technologies and why did it had to reorganize?

JK: Founding idea in terms of intellectual property development, like the music genome project, was fantastic. Founding ideas in terms of business model will help people sell music was not really such a great idea.

BF: It was to get people to sell more music.

JK: Yes, it was really to be a recommendation engine. The early business was like powering kiosks in Borders and Best Buy. The software in the kiosks was provided by what was then called Savage Beast Technologies. The problem is though that music sales are declining big time and so you can't chase after a business opportunity in a market that's falling off a cliff. That's pretty fundamentally flawed.

BF: So you're saying that it wasn't really the timing. The business wouldn't even make sense today.

JF: It was bad timing and the timing only got worse. It was a mediocre idea with terrible timing. I think also what is vitally important in a young company is founding sense of purpose. We wanted to enable people to discover and enjoy music that they love. That was the founding purpose. And we never moved away from that. I think it is an important distinction of understanding what brought you together to start the company. It's so hard to found a company. In almost in any case there is a deep passion about solving a problem. You need to hold on to that fundamental purpose although there may be course corrections on the business model but that is all part of the art of a great startup. You cannot be all over the map where you and your team have lost your fundamental purpose.

BF: Have you had any failure that you've had specifically that has made you a better CEO at Pandora?

JF: There is so much to choose from. When we came out of revisioning the company around what everyone knows is Pandora. The truth is that when we were just getting around to launch the product, we were running out of money, and none of us had experience running an ad-supported business. We were slow to see that ad supported was a big opportunity partly because it wasn't our experience that we were afraid to see ad supported as a big opportunity. Fortunately along came a new investor who not only brought the money but brought the perspective that the big opportunity is ad supported.

BF: They helped you understand?

JK: Yes. They helped us understand that and overcome the fact that you don't want to be driven by just your own experiences. The fact that none of us had experience should not drive us away from the opportunity. You don't want to be driven by your own experiences. The right thing to do is have someone join the team with that key experience of the business because now we have a great success story.We went through a period of anxiety in terms of going after what history has proved is really the right opportunity. We were hesitant when there was danger in being hesitant.

BF: Well, it looks like you're doing great today, so you've learned a lot. Thank you so much for sharing your insights.

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Bambi Francisco Roizen

Founder and CEO of Vator, a media and research firm for entrepreneurs and investors; Managing Director of Vator Health Fund; Co-Founder of Invent Health; Author and award-winning journalist.

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Pandora, the leading internet radio service, gives people music they love
anytime, anywhere, through a wide variety of connected devices: laptop and
desktop computers, smartphones, connected BluRay players, connected TVs,
etc. Personalized stations launch instantly with the input of a single “seed” –
a favorite artist, song or genre. The Music Genome Project®, a deeply
detailed, hand-built musical taxonomy, powers the personalization or
Pandora. Using this musicological “DNA” and constant listener feedback
Pandora crafts personalized stations from the more than 800,000 songs that
have been analyzed since the project began in January 2000.
More than 75 million people throughout the United States listen to
personalized radio stations for free on Pandora through their PCs, mobile
phones and devices such as the iPad, and connected in-house devices
ranging from TVs to set-top boxes to Blu-Ray players. Mobile technology has
been a significant factor in the growth and popularity of Pandora, starting
with the introduction of the Apple app store for the iPhone in the summer of
2008. Pandora instantly became one of the most top downloaded apps and
today, according to Nielsen, is one of the top five most popular apps across
all smartphone platforms.

Pandora is free, simple and, thanks to connectivity, available everywhere
consumers are – at the office, at home, in the car and all points in between.
In 2009 the Company announced that Pandora would be incorporated into
the dashboard in Ford cars via SYNC technology; GM has already followed in
announcing plans to integrate Pandora into its vehicles and Mercedes-Benz
introduced their Media Interface Plus device that works with the
free Pandora iPhone app to provide direct control of Pandora from in-dash
stereo controls. This was all great news for the millions of Pandora listeners
who had been plugging their smartphones into car dashboards to listen to
personalized stations while driving. More than 50 percent of radio listening
happens in the car, making it a crucial arena for Pandora.

Today tens of millions of people have a deeply personal connection with
Pandora based on the delight of personalized radio listening and discovery.
These highly engaged listeners reinforce the value Pandora provides to: 1)
musicians, who have found in Pandora a level playing field on which their
music has a greater chance of being played than ever before; 2) advertisers,
who benefit from the multi-platform reach of Pandora, as well as its best
practices in targeting consumers for specific campaigns; 3) the music
industry, which has found in Pandora a highly effective distribution channel;
and 4) automobile and consumer electronics device manufacturers, who have
noted that incorporating Pandora into their product makes it more valuable
to consumers.

Pandora continues to focus on its business in the United States. The radio
arena has never been hotter, thanks to technology that enables radio to be
personalized to the individual and more accessible than ever before. Right
now millions of people listen to Pandora in the United States and we hope
someday to bring Pandora to billions of people around the world.

• 2000 – Tim Westergren’s Music Genome Project begins.
• 2005 – Pandora launches on the web.
• 2008 – Pandora app becomes one of the most consistently downloaded
apps in the Apple store.
• 2009 – Ford announces Pandora will be incorporated into car
dashboard. Alpine and Pioneer begin selling aftermarket radios that
connect to consumers’ iPhones and puts the control and command of
Pandora into the car dashboard.
• 2010 – Pandora is present on more than 200 connected consumer
electronics devices ranging from smartphones to TVs to set-top boxes
to Blu-ray players and is able to stream visual, audio, and interactive
advertising to computers, smartphones, iPads, and in-home connected


Joseph Kennedy

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