>> his first love was the piano. he spent 10 years on the road playing keyboard in a rock band. along the way he invented a way to bring the audience to them. it's now a gigantic musical database curated by listeners that aims to predict what you want to hear. you know it as pandora. today, more than 80 million people tune in every month to

listen to millions of songs on over 7 billion pandora stations. joining me today, pandora founder tim westergren. thank you for coming. what is on your pandora playlist these days? tim: ben folds, and i find other artists i like. i have jazz, folk, country. emily: i was happy to find the "frozen" station, the toddler station. when did you discover your own musical talent? tim: i began playing piano when i was about seven. learning just enough about chord structures and improvisation to allow me to get around the keyboard. after that i just fell in love with it.

after i graduated, i spent the first few years playing piano nine hours a day. emily: how did you support yourself? i know you played at a holiday inn. tim: i was a nanny, that was my job for about five years. my life was piano all morning, afternoon with kids, and then come back home and play piano before i went to bed. taking care of kids is good preparation for managing a rock band. emily: then you actually went on the road. tim: that's right, i got to see this whole invisible world of working musicians for a long time. the band was called yellow wood junction. emily: at what point did you say, this is not going to pay the bills? tim: film composing -- it was the next chapter of my musical career. i began trying to compose anything i could get my hands

on. it could be a commercial -- i was actually getting ready to move to l.a. and jump in wholeheartedly when the idea for this company popped into my head. emily: what was the lightbulb moment? tim: i read an article about aimee mann. the audience was not quite big enough for her to warrant the attention of a producer. she was kind of in a no man's land. all these hundreds of musicians i'd known, all living in obscurity, there was all this talent nobody knew about. one thing i had learned to do was understand someone's taste. i did that by essentially putting them through a musical interview where i would play a song for them. based on their reaction to what i played for them, i would kind of hone in on their taste or

what they wanted for their movie. i thought in that moment, what if i could codify that and then build a discovery tool? emily: so that was the seed that became the music genome project which is sort of a part human, part algorithm way to figure out what people want to listen to. tell us how it works. tim: we built a 450 attribute musical taxonomy, which is essentially every dimension of melody and harmony, kind of like musical dna. we have had trained musicians analyze songs one at a time and score them attribute by attribute. it's the equivalent of a musical fingerprint for each song. emily: what are they asking, how emotional is it? tim: they get trained very extensively before they start this.

emily: you pitched the idea 348 times before an investor was interested. tim: about 50 people were not getting paid for two years. a little over two years. i do think everyone believed that the idea was really powerful. emily: it was an interesting time because this was the height of napster and a lot of trauma in the music industry. tim: the music industry at that time, a lot of good content was going to disappear. i maxed out 11 credit cards by the end of 2003. i was in hundreds of thousands of dollars of debt to people. emily: how many times did you think about giving up? tim: i never thought of giving up. it wasn't until 2005 that we took a left-hand turn and repurposed the music genome

project into something different, into what we called one click custom radio, which we launched in the fall of 2005, and it took off like a rocket ship. we had some near-death experiences, but we really had just two big chapters pre-and post pandora. emily: now here we are at the 10th anniversary of pandora. tim: we had the idea that we would be ad supported. initially we thought it would be subscription-based, but that was short-lived. our idea was to be ad supported. it was touch and go for a long time. emily: you went public in 2011. tim: i was proud of that. it's a marker. not that many companies get to go public. it was not lost on me. it's never far from my mind. that was quite a moment and

everyone was proud of it. emily: why didn't taylor swift pull her music off pandora? ♪

emily: so what do you do now at pandora? tim: i wear a lot of hats. i do a lot of evangelizing for the company. our listeners, advertisers, the music industry, capitol hill occasionally. we do operate under federal copyright legislation. it is an important arena for us. emily: what is the future of pandora as you see it? tim: the majority of stuff we play has not played on radio before. we are in the process of putting those tools in the hands of musicians. the goal is for pandora to be a great place for artists to go and commune with their fans, connect with them. we will eventually give you the ability to pull out your smart phone, log into your pandora

account, zoom into portland and see how many people there have thumbed-up your music, send them a message and say we are playing a show in portland. emily: you guys are giving the opportunity to send messages to their fans, giving access to data. tim: the first part of what will be a long set of features, called the artist marketing platform. any artist can claim their identity, login and have access to all of their data.

they can see a map of their audience across the country, where the thumb-uppers are. the next step will be allow them to send messages. emily: do they have to pay for it? tim: no. we have two or three concerts in our office a week. there are 12,000 artists on pandora that have at least 350,000 unique listeners that have created a station using their name. of those 12,000 artists, 80% have never played on the radio before. emily: one artist claims it was the 13th most streamed song on pandora in 2014 in the united states. but it yielded only $12,359 which works out to $90 for every million streams. is that accurate? is it ballpark? tim: i can't do the math in my head, but i'm sure it's ballpark. emily: it doesn't sound fair at all.

tim: a spin on a broadcast station goes out to hundreds of thousands of listeners. let me put a little context because it's really important. it's a heated topic and it suffers from a lot of misperception. the first thing is, pandora pays about half its revenue in royalties. about $1.2 billion to date. the bulk of that royalty goes to the performer. a much smaller portion goes to the songwriter, which is what that quote refers to. that ratio is not set by us. that is the subject of law that predates pandora. that is an industry question, how should that money be divided up? the second thing is, pandora pays more than any other form of radio. we pay not only the composer but the performer. broadcast radio does not pay the performer anything at all.

the elephant in the room is, why do you have this industry that is many times the size that does not pay performers, where we pay substantially. emily: so who should be paying? tim: i think all streaming radio should pay both composers and performers, absolutely. it applies to every business streaming online. radio, online, off-line. those businesses should be sharing their stake with artists. the revenue coming from pandora is being fairly shared with the business. emily: do you think artists should be paid more? taylor swift pulled her music off spotify. why did she not pull it off pandora? tim: we are under a compulsory license, meaning artists cannot pull their music off pandora. what they are responding to is a lack of transparency.

they see and read about the economics of these businesses and don't see it reflected in their royalty statement. what happens in the middle there is a black box. i think that's happening more and more. emily: you have to think people like taylor and jay-z have the best lawyers, the best people out there. spotify is not making enough money for you. tim: it's true that some artist by virtue of their popularity have the ability to command more and set the terms more. that's not true of the vast majority of artists. emily: is there a tim westergren station? tim: it's called yellow wood junction. emily: will pandora ever offer live traffic and weather and sports? ♪

emily: the quest for the

perfect playlist includes spotify, i heart radio, google music, amazon music -- how do you think about, who is my competition? tim: anybody who has a radio product, itunes radio when it came out definitely a direct competitor. when we think about our own future, it's really about how do we remain the best playlist building business around? i think so far the numbers bear it out. we keep growing in spite of all this competition. what i think with apple is, never underestimate. never think you know what they are doing. it's a very smart company. emily: beats music will be relaunched this summer, maybe a new name. how worried are you about that?

tim: what i've learned, i keep learning this year after year, building a great playlist is fantastically hard to do. we find over time, more and more confidence in the differentiation we have. emily: did you ever meet steve jobs? did you talk to him about the future of music? tim: i only said two words to him. they wanted pandora highlighted. myself and our cto got to give an informative presentation. we spent a week in a room rehearsing a three-minute presentation. we were kept under lock and key and escorted in and out of the building. we had to rehearse the talk many times for a successively smaller and smaller group of executives until the final thumbs up. he did say "good job" after our presentation, so i take that as great praise. emily: there has always been talks about why doesn't apple buy pandora?

is any of that true? tim: we don't comment on stuff like that. i look at them as an incredible partner. stepping back, they sort of invented this field that we benefit from. emily: spotify just raised $4.5 billion. more than twice pandora's market cap. they are more focused on subscriptions and pandora is more focused on ads. tim: we stick to our knitting. having been in this business for a long time, it's an exciting business, there's lots of drama. i've always found the best thing we can do is just stay focused on what we do. we have built a huge national sales force. we have hundreds of sellers in 50 markets around the country who are now penetrated into local advertising. in the long run, that kind of

foundation is how you build a really big business over the years. emily: do you think people don't want to pay for music? tim: i think there will be a larger audience that will pay to transact with an artist to whom they feel connected. think that's one of the great opportunities pandora can unlock. emily: spotify's in 50 countries and pandora is in three countries. is that something you think you will figure out? or is this how your business is going to be? tim: international is inevitable. it's a matter of finding the right licensing area. answer. we have done direct deals. the key with the direct deal is, do both sides understand the value each other brings?

emily: it seems like apple and spotify get the buzz. tim: like the little engine that could. we have been through a lot of ups and downs. that's become part of our dna is a culture. we are a modest company. we treasure humility. it's actually a company principle. there are 25 pandora killers that i can count. i don't get frustrated by who has the limelight at any given moment. emily: will you ever have live traffic and weather and sports on pandora? tim: i think it will eventually find a home on pandora. how do you do that in a way that is elegantly integrated with the music experience? it would be nice to listen to a station and get on the hour bloomberg tv or geographically targeted sports or news. eventually -- right now we are

focused on music, but i think that will come. emily: what about podcasts? tim: another interesting area. we would like to bring our own twist, how do we have it be easily navigable and bring intelligence to that approach. but i can easily imagine that on pandora someday. emily: what about music video on pandora? tim: it's interesting to consider. a small number have quality videos. that will change over time. emily: we have a presidential race happening. i know you're trying to nab local and national ad dollars. tim: our advertising business has grown exponentially over the years. in some ways it's tailor-made for us because we can geographically target messaging.

we can do it through audio messages, video messages. i anticipate that will grow and grow. we can predict based on your zip code and the style of music you are listening to, your political affiliation to 98% accuracy. music defies stereotypes, but apparently the data is very powerful and predictive. emily: are you playing music anymore? tim: i went cold turkey when i founded the company. i needed a break so there were a few years when i was away from the piano. now i am back into it. emily: what is next for tim westergren? tim: i really want to get back to composing, which is my real passion. i would like to see pandora as a platform, to have a positive social impact.

emily: where will pandora be in 10 years? tim: it will be global, for one. and it will have billions of people on it. it will also change what it means to be a musician. i remember in my 30's thinking, i feel so much pressure to quit music and go get a job, because i wasn't making enough money. i know a lot of musicians who went through that. that's a huge loss for society. artists don't get to keep making their art. it's true of all forms of art. what if music was a much more stable career, then maybe tens of thousands of musicians could make a living at it, not just a few hundred. maybe it would literally change the place of music in culture. that's what i think we can effect. emily: we will check back with you in a decade. tim westergren, thank you so much for joining us. great to have you. thank you. ♪

brad: virtual reality takes center stage in silicon valley. we will show you how the technology is going to be used and what companies are poised to be the big winners in vr. ♪ i'm brad stone in for emily chang and this is "bloomberg west." coming up, amazon milk, amazon baby food -- we will look at what jeff bezos may have planned it next. should apple worry? xiaomi's hugo barra opens us to us about the company's plan to expand in the u.s. and the emerging class of social media celebrities. i will introduce you to the brains behind twitter's plan to create original content.