"Each new entrant into Internet radio is to me further validation that this is where the future is," he says. "To the extent that Spotify launches radio, yes, that competes with us. But we've never lacked for competition: When we started, AOL, Yahoo, and Microsoft all had huge online radio audiences. It's not new to us."
Though a wide range of critics view Echo Nest as serious competition to Pandora's service and recommendation algorithm—it's already powering Spotify Radio, for example—Westergren isn't fazed. Pandora has 100 million registered users. The average user listens to Pandora for more than 18 hours a month—compared to the average user on Google and Facebook, who spends just two and eight hours on the services each month, respectively. That's partly why Westergren is so confident in Pandora's future, even as more and more on-demand subscription services—like Spotify, MOG, and Rdio—begin to crowd the digital music space and overlap its market. But Westergren doesn't see these on-demand services as competition. He sees them as complementary services and even potential partners. "[We] live happily alongside on-demand options," he says. "Every year we've had subscription services around us, but there's no evidence since we've launched that these two different modes compete."
Take Spotify. The Swedish-founded startup, which boasts 2.5 million subscribers, recently unveiled an app platform with launch partners that include Last.fm and Songkick. Would Pandora ever become an app on Spotify? "Yeah, it's an interesting thing to consider," Westergren says. "The wild card here is music licensing. The implementation and partnerships are very much constrained by what licensing allows. We are a radio service, and we are subject to a very specific set of constraints as a consequence of our radio license. We'd love to offer more interactivity."
The partnership is not likely to come to fruition anytime soon—the licenses behind web radio services like Pandora are governed by the Digital Millennium Copyright Act (DMCA), whereas Spotify and others have direct contracts with labels, making any integration quite a hairy problem. But Westergren's willingness to even consider a partnership with such a presumed competitor is an indication of how he views the marketplace. Internet radio has always fallen somewhere between more traditional music sellers (iTunes, Amazon) and on-demand services. So while subscription services "massively diminish" the value of iTunes, according to MOG CEO David Hyman, Internet radio has always offered a happy medium. And Pandora's secret sauce has always been music discovery, or "the I-don't-know-what's-coming-next part of listening," as Westergren phrases it.
Even as Spotify and other on-demand services begin to lean more toward Internet radio, Westergren still believes Pandora offers a distinct service. "Music, most of the time, is a background experience," he says. "It needs to be easy to play stuff you know and don't know, and not require a lot of administration. My sense is that they [Spotify, MOG, Rdio] are still very much focused on their subscription business."
[Image: Flickr user Kannan B]