We knew 2016 was going to be a year of big changes for Pandora, but few expected this development. After more than two years as CEO, Brian McAndrews is stepping down. Taking his place will be cofounder Tim Westergren, long the public face of the streaming music company.
Pandora's executive shuffle comes at a pivotal, somewhat challenging time for the company. Having struggled to grow its roughly 81 million users last year (and still reporting a financial loss), the company is now poised to enter new territory this year, both in a business and in a geographic sense.
In 2015, Pandora made three very interesting—and totally different—acquisitions. Using the talent and technology of Rdio, Pandora is now building an on-demand streaming service akin to Spotify. This will be layered on top of the personalized radio service that Pandora pioneered and has dominated for the last decade. In the process, the company hopes to expand to more countries. Unlike other major music streaming services, Pandora only operates in three countries: the United States, Australia, and New Zealand.
The company also bought concert ticket vendor Ticketfly, which it is now using to build features to help sell tickets directly to fans through the Pandora music service, as well as through the existing Ticketfly website and apps. For Pandora, the Ticketfly acquisition opens up new possibilities for both listeners and artists, but it's also—crucially—an additional source of revenue that's free of the pressures and complexities of licensing millions of songs from labels and songwriters. As if all of that wasn't enough, Pandora also bought Next Big Sound, a powerhouse of analytics about music on the Internet that's already being fused with Pandora's own mountain of listening data.
Phew! So, in short, Pandora is becoming a direct competitor to Spotify and Apple Music and a (smaller, not entirely direct) competitor to Ticketmaster and bolstering its already insane data science capabilities in an effort to better serve listeners, artists, and advertisers with a whole host of new offerings for everyone involved.
That's a tall order. So why switch CEOs in the middle of it? The company won't comment on why McAndrews is out, although it reportedly came as a bit of a shock internally.
What's more obvious is why Westergren might be taking over. It's easy to think of it like a Jack Dorsey moment: A founding nerd-turned-charismatic-leader returns to the helm of a maturing tech company to help reinvigorate it with some of its original founding spirit. There's probably some truth to that. It's also worth noting that today's shakeup (several other executives are shifting their roles a bit) comes amid rumors that Pandora may be looking for a buyer as the streaming music market gets dramatically more competitive.
But it's hard to deny that Westergren's personal vision is closely aligned with the strategic shift we've been seeing at Pandora over the last few years. McAndrews, a decorated corporate executive, has spent most of his recent career working in venture capital, marketing, and telecommunications after stints at ABC and Disney in the 1990s. Such a resume lends itself well to running a media company like Pandora. But as the competitive landscape has changed and Pandora has failed to turn a profit, the company has started to branch out into new business territories and tighten its focus on the thing that made Pandora possible in the first place: music and musicians.
Westergren, who cofounded Pandora in 2000 and helped mastermind its "music genome" algorithm, originally served as the company's CEO from 2002 until 2004. In recent years, he's acted as the public face of the company, including through its controversial (and unsuccessful) efforts to reduce its artist royalty rates through legislation. Despite the flack he received from some artists at the time, Westergren has always considered himself something of a champion of musicians. He himself is a composer and former touring musician, and he has helped promote efforts within Pandora to build out features that more directly serve artists, such as its Artist Marketing Platform (AMP). A more recent feature called AMPcast lets artists record short audio messages (say, promoting an upcoming album release) and broadcast them to listeners. Pandora has also helped musicians plan tours by using its trove of listener data. The acquisitions of Ticketfly and Next Big Sound are a natural extension of this.
Of course, none of these things is a silver bullet. Pandora already had a very difficult business model in place: Between hefty music licensing costs and the fact that ad-supported, free listening just isn't as lucrative as paid subscriptions, it's been hard for Pandora to turn a profit. That was true even before on-demand services like Spotify, Rdio, Apple Music, and Tidal came along and started nipping at listeners' attention spans. And while Apple's 2013 launch of iTunes Radio did little to affect Pandora's usage, Apple Music (complete with the much-adored Beats One radio station and mind-blowingly smart playlist curation) has been gaining traction quickly since it launched last summer. By the time Pandora manages to get its own subscription service off the ground, Spotify will be well past the 30 million subscriber mark and Apple might not be that far behind.
The last time Pandora got a new CEO was when McAndrews was hired in 2013. In those three short years, the music streaming market has changed quite a lot—and it shows no signs of stopping soon. For Pandora, the change is apparently only just beginning.