>> his first love was the piano. way, he met so many musicians that couldn't find an audience that he wanted to find a way to bring the audience to them. he created the music genome project which is a huge database created by real listeners that aims to protect what you want to hear. you know it as pandora. people tune in every month to

listen to millions of songs. joining me today on "studio 1.)," tim westergren -- "studio 1.0," tim westergren. of artistsare a lot that i like, but there are a lot of other artists that i like. >> i was very happy to see a frozen station, a toddler station, they are very big hits at our house. i began playing p&l at about seven and i lived in france at the time. i learned just enough about chord structures to play the p&l and after i graduated, i spent about four hours or five hours

after school playing p&l every day. >> how did you support yourself? i know that you played at a holiday inn? tim: i was a nanny, that was my job after college. my life was p&l all morning, afternoon with the kids, and then playing p&l until i went to bed. watching kids is great training to manage a rock band. we were on the road a time and i got to see the kind of world, this invisible world of working musicians for a long time. did you say,int ok, this is going to pay the bills? ultimately film composing was the next chapter of my musical career. >> so you went to hollywood to try and make it? tim: yes, i basically tried to

compose for anything i could get my hands on. i jumped in wholeheartedly. >> what was the lightbulb moment? tim: i read an article in the newspaper and it was an article about aimee mann. there was not a big enough audience to warrant her to sign with a major and she was kind of in this no man's land. she was among all of these hundreds of musicians that i had known, living in obscurity, and there was so much talent that not many people and new about. as a film composer, one of the things that i really learned to -- and based on the thumbs-up or thumbs down of what i would play for them, i would kind of hone in on to their taste.

and i thought in that moment, what if i could codify that and then build a discovery tool? >> so that was the beginning, the seed, that became the human -- using genome project. tell us how it works. tim: what we have done since 2000 is we have built this musical taxonomy that essentially has every dimension of melody and harmony and it is kind of like musical dna. we had trained musicians analyze songs for them, attribute by attribute, and sort of capture the idea of a musical. >> how happy is this, how emotional is this, how much music as their? -- is there? 348 timesd this idea before an investor is said that

they wanted to put their money on the. -- on that. tim: yes, and nobody was getting paid. it was a pretty tough time. theirpeople work to without pay for more than two edars -- work to their -- work there without pay for more than two years? tim: yes, it was really hard. the music industry at that time was -- yeah, a lot of people thought that i was going to disappear. a lot of people thought that we were going to go bankrupt, for sure. i maxed out 11 credit cards. we were in hundreds and thousands of dollars of debt to people. it was pretty frightening. >> how often did you think about giving up? tim: i didn't think about giving up. i was thought that i would go down with the ship.

2005 that weil music genomeo the project. pandora and itto took off lucky rocket ship. >> and here we are now, the 10 year anniversary of pandora. had the idea that we would be ad supported. but when we grew, our idea was -- addupportive, so supported, so it was kind of touch and go for a long, long time. >> you went public in 2011? i was proud, and not that many companies get to go public. that is never far from my mind.

that was the moment where i thought everybody was really proud. >> why did taylor swift pull her music off andorra? -- pandora?

emily: what do you do now at pandora? tim: i wear a lot of hats, do a lot of evangelizing for the company. we have many audiences. we have advertisers, the music industry, capitol hill occasionally. we operate under federal copyright legislation, so that is important for us. emily: what is the future of pandora? tim: the majority of it is music that has never played on radio before. we know a lot about every listener and can communicate with them. we are in the process of putting those tools in the hands of musicians. ideally, pandora will be a place for artists to go and connect with their fans. it will eventually give you the ability to pull out your smart phone, login to your pandora

account, zoom into portland, and see how many people there have created a station with your artist name. give a 15 second audio message saying, this is tim from so-and-so. we will be playing a show tomorrow night in portland. emily: and pandora is doing more to give artists power. you guys are giving them the opportunity to send messages to fans, access to data. tim: we surfaced the first part of this, what will be a long set of features, we call pandora amp, the artist marketing program. any artist can claim their identity, log into pandora, and have access to all of their data they will see all of the songs that are spinning, their audience plotted on a map of the country, so they can target their touring. the next up is to allow them to start sending messages to them. emily: do they have to pay for it? tim: it is totally free. we have an active pipeline with

the music industry. there are two or three concerts a week in our offices. take advantage, when a band visits, to show them their data. there are 12,000 artists on pandora that have at least 350 thousand unique listeners that have created a station using their name. of those 12,000 artists, 80% have never played on the radio. emily: aloe blacc claims his song was the 13th most streamed on pandora in 2014. more than 168 million streams in the united states. but that yielded only $12,350 in pandora royalties, which works $90 for every million streams. -- to $90 for every million streams. is that accurate? tim: i am sure it is ballpark correct. emily: $12,000, if that is anywhere near ballpark, does not

sound fair. tim: people talk about spins on radio. a spin on a broadcast station goes out to hundreds of thousands of people. let me put a context that is important, because this is a heated topic. i think it suffers from a lot of misperceptions. the first thing is, pandora pays half of its revenue in revenues. -- royalties. we did $450 million last year. the bulk of that revenue goes to the performer. a much smaller proportion goes to the songwriter, which is what that quote refers to. that ratio is not set by us. that is a subject of law that predates pandora. that is an industry question. how should that money be divided up? the second thing is, pandora is the highest paying former radio. we paid more than any form of radio. we pay not only the composer,

but the performer. broadcast radio is a much bigger industry and does not pay the performer anything at all. the elephant in the room with this conversation is, why is it that you have this industry that is many times this size that does not pay performers, where we pay substantially? i think that has to get worked out over time. emily: who should be paying? tim: i think all streaming radio should pay both composer and performer, absolutely. emily: who does that apply to? tim: it applies to every business streaming online, radio, online, off-line. those businesses should be sharing their stake with artists. i think the revenue coming from pandora is being very fairly shared with the business. emily: do you think artists should be paid more? you are an artist yourself. tim: the way we are sharing is equitable. emily: taylor swift pulled her music off of spotify, but not pandora. tim: it is under compulsory license, which means artists cannot pull music. artists are responding to a lack

of transparency. they see and read about the economics of these businesses and do not see that reflected in the royalty statement. what happens in the middle there is a black box. i think that is happening more and more. i think tidal was triggered by the same thing. emily: you have to think people like taylor and jay-z have the best lawyers out there, saying spotify is not making enough money for you. tim: i think it is true that some artists, by virtue of their popularity and scale, have the ability to command more and set the terms more. that is not true of the vast majority of artists. emily: is your music on pandora? is there a tim westergren station? tim: it is called yellowwood junction. emily: will pandora ever offer live traffic and weather, sports? ♪

♪ emily: the quest for the perfect

playlist includes spotify, itunes radio, beats, rdio, i heart radio, amazon music, tidal. how do you think about your competition? tim: anybody who has a radio product. broadcast radio is the biggest competitor. itunes radio, when it came out, direct competitor. when we think about our future, it is 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 this competition. emily: sirius xm, a competitor. tim: with apple, a smart company. never think you know what they are doing. emily: beats music will be relaunched this summer. maybe a new name. how worried are you?

tim: we have not lacked competition for a long time. i keep learning year after year, building a great business is -- 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: we said two words to each other. we had the great honor to be on stage at cupertino when they wanted pandora to be highlighted. tom and i spent a week in a room rehearsing a three-minute presentation, and we were kept under lock and key and escorted in and out of the building. we had to rehearse the talk many, many times for a successively smaller and smaller group of executives, until the final thumbs up.

he did say "good job" after our presentation. i take that as great praise. emily: there has always been simmering talk about, why doesn't apple buy pandora? did apple try to buy pandora? tim: we don't comment on things like that, of course. i look at them as this incredible partner. stepping back, they have invented this field we benefit from. emily: spotify just raised $400 million at an $8.5 billion valuation. you are focused on ads. what you think about that comparison? tim: we stick to our knitting. this is an exciting business with drama and news. the best we can do is stay focused on what we do. you have figured out how to monetize internet radio, which no one else has. 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. emily: do you think people do not want to pay for music? tim: i think people will absolutely. there will always be a large number of people who want to listen to music without advertising and are willing to subsidize that. i think there will be an even larger audience that will pay to transact with an artist to whom they feel connected. and i think that is one of the great opportunities pandora can unlock. emily: spotify started abroad. it is in 50 countries. pandora is in three -- the u.s., australia, new zealand. is that something you will figure out, or is this how your business is going to be? tim: i think international is inevitable. for us, it is a matter of finding the right license. emily: in the next era, will artists negotiate directly with streaming services? tim: we have done direct deals.

the key is, do both sides understand the value the other brings? emily: it seems like tidal, apple, spotify, they get the buzz. does it affect the business? the stock is down from highs over the summer. tim: the little engine that could. we have been through a lot of ups and downs. that has been part of our dna as a culture. we are a modest culture. we treasure humility. it is a company principle. there has been 25 "pandora killers" we can count. we do not get frustrated by who has the limelight. emily: will pandora ever offer live traffic, weather, sports? tim: there is non-music, sports news -- i think that will eventually find a home on pandora. the thing is, how do you do that in a way that is elegantly integrated with the music experience? it would be nice to be listening to a station and get on the hour bloomberg tv, or on the hour geographically targeted sports or news. so eventually.

right now, we are focused on music. but i think in time. emily: what about podcasts? tim: another interesting category. we have comedy, non-music content. what we would like to do is bring our own twist. how do we help that be easily navigable? had we bring intelligence, a curation approach? emily: what about music videos on pandora? tim: interesting to consider. only a fraction of our catalog of quality music videos. that could change over time. you can see potentially elegant ways to give someone that little, i want to snack on some video right now. emily: we have a presidential race happening. i know you guys are trying to add local and national ad dollars. what is your pitch to advertisers right now? tim: our political advertising business has grown exponentially over these years. in some ways, it is tailor-made for it, because we can geographically target messaging

through audio, video messages. i anticipate that will grow and grow. one of the amazing things about data -- we can predict based on your zip code and style of music you are listening to your political affiliation, with 90% accuracy. emily: who are the democratic artists and republican artists? tim: music defies stereotypes, but the data is powerful and predictive. emily: are you playing music anymore? tim: i went cold turkey when i founded the company. i did not have time for anything and needed a break. it was years away from the piano. i have had the itch for a while and then back into it. emily: what is next for tim westergren? tim: i want to get back into composing, which is my real passion. and then i would really like to see pandora as a platform to really have a positive social impact. emily: pandora in 10 years,

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

♪ emily: he took ebay from a multi-person startup to a power. a -- meg whitman decides to split the company into. --ning me is chairman wake