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>> host: and joining us this week on "the communicators" is steve bene, general counsel for pandora media. mr. bene, how did pandora get started? >> guest: well, first, thanks for having me. this is a tremendous honor, to be included on the show. how did pandora get started? back in 2000 our founder, tim westergren, had the idea because he had been a composer for film. and when he went and talked to directors that he was supposed to compose film scores for, they would always tell him they wanted something that sounded like this meets that, or, you know, some kind of sound that they had in mind that they would reference off an existing musician or a band, and he would go back and try to create something like that. and when he decided that he didn't want to be a music, film composer anymore, he instead

thought, wow, won't it be interesting if you were able to walk into a record store, and when you knew you had an artist or a band that you liked, but you didn't know a lot of new artists that were breaking or anything like that, if you could walk up to a kiosk in that store and punched in the name of a band that you liked and you put on the headphones, and that kiosk could tell you or play for you samples of songs from other bands you might also like because you indicated that you thought a particular band or artist was a favorite. and that was how the music genome project was born. so they went about cataloging all of these songs, you know, thousands and thousands and thousands of songs -- and we now have over a million, million and a half in the genome -- and all of those songs have, you know, different musical attributes. and they've been very painstakingly cataloged by what we call musicologists, many of

them with music degrees, practicing musicians, who will go through and catalog a song based on anywhere from 150-450 different at tickets. and, you know, rank it from 1-5 on things like the vocal quality, things like the rhythm, things like the instrumentals. and through that very careful cataloging, they put together a library of songs, each one with a genetic fingerprint or genome. and then they put these kiosks into record store, and they did exactly what they were supposed to do. the problem is that the music industry changes from time to time, and pretty soon kiosks in record stores were not the best business model to be in. so in 2005 they repurposed it into internet radio. and so pandora as a service was born ten years ago on the web as an internet radio service where they use the genome technology to take signals that we get from our users like starting a station based on a particular

artist, and then we would program the radio station in tracks and in accordance with blogs that we use in order to stream that station under a federal statutory license. >> host: well, you're based in oakland. what are you doing out here in washington? >> guest: we have had -- well, as i mentioned before, the statutory license has been the sort of mainstay of our music licensing up until very recently, although we are now quickly moving past it, and that also, we also have, you know, various rights, interests in terms of the publishing that goes into the songs that get played on the radio, on our radio stations as well. and all of those constituencies are based out here. so although we have been interested in sort of what the goings on in washington, d.c. throughout the entire course of the company, it's only in the last two years that we've really built up our d.c. practice here to really engage with lawmakers and with policymakers in order

to try to shape laws, policies and those kinds of things in the way that we think is good not only for pandora, but for the entire music ecosystem. we're interested in creating a service and operating as part of the music world where everybody gets a fair seat at the table and where the spoils are shared so that everyone has an incentive to keep creating and keep distributing and keep listening. >> host: well, to help us delve into some of those issues, alex byers is joining us. politico. >> thanks, peter. as you've been saying, the big focus over the past two years has been moving from just the internet radio platform to the on-demand streaming. give us a little bit of an update on what that has entailed. any progressing on the business side of things, but also the policy side of things in washington, what do you have to do to make that on-demand product a reality? >> guest: sure. well, this is the result of some very soul-searching, strategic

thinking that's been going on that probably dates back a couple of years now. and it was because the radio product we've had has been immensely successful. we've amazed this tremendous -- amassed this tremendous audience, 80 million monthly, 100 million a quarter who come to pandora on a regular basis in order to let us be their deejay and listen to those radio services. we get lots of response and engagement in terms of thumbs up and thumbs down and picking different radio stations and adding variety and all the things you can do on our platform. but we have started to find that listeners want more than just that experience. and so, you know, it was, like i said, a couple of years ago we started looking around and the existing on-demand players in the space who sort of satisfied that i want to listen to a particular song and i want to listen to it now or create a playlist of music that i'm really interested in. and we found that people sort of move in and out of different

listening states at different times during their day. and sometimes you want to be sort of, you know, not engaged in picking your own music, you want somebody who knows you well enough through the engagement in the service to be able to pick some good music for you, and sometimes you really want to be highly engaged in the music that you're hearing. you want to create a playlist, listen to a full album, something like that. so when we started looking at what the pandora service and products could be, we took this, you know, really green field, sort of holistic view of what we could do. and so we thought about the different kinds of products that we could offer people, and some people, you know, are going to be radio listeners, and they don't mind the advertising, and, you know, in fact, get some value out of the advertising that's good enough for them to be radio listeners and, you know, broadcast radio has existed on that model for decades. other listeners, they like the fact that we play music and select the music for them. it requires very little effort on their part.

it's very elegant, very clean, but they don't want to listen to ads. for those folks we've just introduced an upgrade of our existing ad-free product. we're calling it pandora plus, and it takes the existing ad-free radio service but adds extra things like skipping more times or replays. you hear a song, you want to replay it. you don't need to go to another service to do that now, you can do it right on pandora. and also the ability to play music when you are not connected to the internet. so if you're offline. you don't want to use your data plan, bad cell coverage, something like that. so you've got that as well. and we're currently in development on a sort of pandora-styled, pandora's version of what an on-demand product will look like. unfortunately, we can't go into details yet, we're not ready to release those, but it's going to be on demand in a way that only pandora with our data, with our genome, with our decade of experience in actually helping

users discover new music and select music that they might want to hear and how their musical tastes can expand, we're going to apply that approach to an on-demand product that we think is really key. how we've gone about developing that is through an awful lot of sweat and hard work, and we've also made some key acquisitions over the last year. one of those, not entirely intuitively until you think about the full story, was the ticketing business. ticketfly is meant to address a couple of interesting things. one is with this very large, engaged user base, we have people who are music aficionados. everybody is to some extent. and most of those people have been to a concert or two in their lives. and we found out as we were looking at different parts of the ecosystem that, you know, musicians make an awful lot of their money off of touring and live events. there's a whole business in

promoting live events, in hosting live events, the venues and folks like that. and the biggest single problem in live events is letting interested fans know that there's a concert coming. and so, you know, when we were doing the studies that led up to that acquisition, we figured out that about 40% of tickets go up sold, particularly when you're talking about live music venues that are 5,000 seats and less and the primary reason is because people didn't know about the event. people who would otherwise have been interested in going, didn't know about it before it was too late. pandora has a sort of i unique ability to -- a unique ability to solve that problem. we already know that you're a stone temple pilots fan, and, you know, if you -- or use somebody a little bit more contemporary, we already know that you're an adele fan, probably adele is signed through a different ticketing company,

but if we know that you are a fan of a particular artist and we know that that artist is coming near you, then we can put a shoutout into your feed that lets you know that artist is coming. and as soon as we do a little bit more development work, we'll be able to actually let you purchase tickets right on the service while you're listening to the song. >> sure. let's talk more about the ticketing side of things because that has been an issue you guys have worked on in washington with the box act, which is a bill that you guys are big supporters of. >> guest: that's right. >> it basically would prohibit ticket-buying programs from gobbling up all these tickets and reselling them at high premiums. it seems to me like it's had a lot of success so far in congress. it just earlier today passed a congress subcommittee and the house either earlier in this week or last week, sometime recently. a lot of people sort seem to like the underlying idea.

i'm wondering if you've gotten pushback on parts of the bill especially given that it necessarily seeks to control, to some extent, what people can do with computers, the kinds of programs you're allowed to write with. that is an issue that has been a problem for digital activists in the past with the computer fraud and abuse r abuse act. is that an issue you guys have had to deal with as you advocate for this bill? >> guest: you're absolutely right, it's been great to see it get the bicameral and bipartisan support that it's gotten. so we're very encouraged by it. we view et as a matter of is access. unfortunately, bots, they do buy tickets, but they, what they do is they keep other fans out of the market for tickets. and what we are finding is, you know, some fans really want to go see a concert, and, you know, they can mash the buttons on their computer all day long, but you can't beat a bot, right? so they're not able to get

tickets in their first run are at their list price, so they're left with only the opportunity of buying those tickets on the secondary market after the bots have gotten them and passed them along to promoters who then raise the prices significantly. >> sure. >> guest: a lot of those fans are priced out of the market. and even those fans who can buy those tickets on the secondary market are playing a lot more than than they otherwise would have had to if they'd had fair access to those tickets when they first went on sale. and all of this doesn't put more money in the pockets of promoters, venues or artists. so we see this as just a fundamental fairness issue in terms of the access to the ability to buy ticket tickets. and, you know, the general public does not have access to being able to program a computer bot to get tickets as quickly as possible. i analogize it to the stock market where, you know, people who are trying to trade individually on a stock market are really facing a tremendous disadvantage against computer

orized trading in the same way. who can react in billionths of a second. this is just trying to give people access in a way that continues the sort of revenue streams. it allows concerts and venues and things like that to go ahead and reach the fans that they want to reach. it gives artists who are particularly interested in this because they really want the fans there. not really with less concern about their ability to pay if they're willing to, you know, put up the initial purchase price of the ticket, less concerned about somebody else making money because the secondary market prices went through the roof. >> host: well, steve bene, on the radio side there's a lot of talk in this town about how artists are compensated. >> guest: yep. >> host: at pandora, what is your policy -- how are artists who are plaid on your radio -- played on your radio station compensated? >> guest: so historically our compensation for recording artists, we have used the

statutory license, copyright section 114 in order to play the sound recordings that we play on our radio service, and section 114 comes with some limitations on how we can mix in recordings of different artists at different times and the features and functionality we can provide for that service because it's meant to be a radio-like service that qualifies for this license. with that comes a statutory license rate, and we went through the rate-setting proceedings last year. and as a result of that, we count up the number of plays of any particular song that we have and, you know, it's in the billions, but every quarter we send the information to a service called sound exchange which is the sort of designated service on behalf of the copyright royalty board to administer the payments for the statutory license. we write the check to sound exchange for all of the plays on the service that we've had, and then sound exchange divvies it up among all the different rights holders.

half of those payment, roughly half, actually go directly to the featured artists, the backup artists and in some cases the producers that worked on those albums and songs and roughly half dose to the labels that represent -- goes to the labels that represent the interests in the song. that's one of the great features through sound exchange, is that artists get paid directly. they don't have to go through label recoupment models and things like that to get that check. so they get a nice, reliable check every quarter that they're able to count on from those services. >> sure. let's talk more about -- you were talking this is what's going on in washington right now. >> guest: yep. >> there's the house copyright review that chairman goodlatte has been pursuing for a few years now. the talk is next congress will be when the real action happens. dui me your assessment -- give me your assessment though. we were supposed to see more from the committee over the past

several months in terms of outlines of the direction they might be going. as far as i'm aware, those haven't been circulated, certainly not publicly. what do you think? are we going to see some kind of music licensing reform next congress or is that, frankly, too big of a lift for washington to accomplish? [laughter] >> guest: well, first off, i don't know anything that you don't know. >> okay. >> guest: so we haven't -- i don't know what timing is likely. and i haven't seen any contours of what a comprehensive copyright licensing bill might look like. what i hope though, and we sort of have been consistent about this in the conversations that we've had with various stakeholders there, there are a lot of different things that could be folded into a copyright rewrite, right? and people can debate all different kind of sub-issues and pieces of what a copyright rewrite could include. my view is that none of this will actually come to fruition or be effective unless and until you solve the core data problem that lies at the bottom of

especially music rights administration. there's just no way for services like us, for the general public, for even, you know, artists groups, publisher groups, those kinds of folks to know with fidelity and with certainly who owns what. >> right. >> guest: and this is especially acute in the publishing arena because you have songs with so many different cowriters and co-owners. but even in the sound recording arena, there's just no way of knowing who owns rights into what piece of a piece of copyrighted music. and so until, until we get some kind of -- and my view is sort of an endorse canment of what the copyright office said in the report that they wrote that came out last year which was that there is really nobody better than the government to at least oversee this data project. and so, you know, i think they're right. and and i hope that any kind of copyright rewrite is going to

come with a requirement or some kind of framework for putting data into a central repository where people can have access to it, where it can be searched not only on an item-by-item basis, but on a sort of scale basis. we run two and a half million songs through, and we're going to get more and more every day as we move toward an on-demand service. you can't search for rights on an individual song basis. you need a machine interface that searches for those things globally. >> let's talk more about the copyright office because a lot of the conventional wisdom is if there is something to be addressed in sort of the near term on a copyright review, it will be modernization of the office which is known to be a little bit of a laggard when it comes to updated technology. beyond the i.t. upgrades, there has been this question of should the copyright office be part of the library of congress, should it be its own stand-alone entity, part of the department of commerce, and there's been a lot of debate there. but lately we've seen -- what

seemed to me to be an increase in a lot of digital groups, frankly, groups that are aligned with pandora on a lot of copyright issues really questioning kind of the biases or the motives of the copyright office and saying that they're kind of, you know, in the pocket of the content industry. i'm wondering if you worry about the same thing or if there's something else that needs to be done in terms of making sure that the copyright office is a neutral arbiter. >> i think what's most important is the first point that you mentioned, and that is, you know, i'm not sure that the copyright office the right place for sort of, you know, a data repository of music rights licensing or of music rights ownership, if that's the right place for it to live. but they will certainly have a very big role in overseeing the creation of something like that if it were to come to fruition. so i think the sort of technological advances forward

are, you know, very much a part of copyright office reform, and i think that's exactly where the emphasis ought to be placed. you know, they have a big role to play in being able to pull fill this kind of a mission -- fulfill this kind of a mission, and i'm not sure having a bias one way or another within that particular avenue of effort is going to matter so much, right? it matters more that they are trying to get something like this created, that they're contributing to the mechanisms or incentives to get it created and that they can at least oversee whether it's a public/private collaboration or whether it's, you know, a full on sort of public endeavor, that it's done in the right way and that it's done sort of in fairness -- >> but even outside of the transparency context, you know, when the office weighing in on matters of copyright law, is it your sense that they're doing so from a neutral perspective?

>> guest: i'm not sure that -- is there a particular instance that you're thinking of? >> there have been papers that have been written by public knowledge and i think electronic front tier foundation is looking into this as well, i haven't read all their literature, but the sense or the retention is that this is a recurring issue. >> guest: yeah, i guess in the matters that we have looked at the copyright office and in the papers that i have, that i have studied that they have put out, the opinions that they've sort of used to help inform some of the major issues, i didn't get a sense of bias when we, when i was looking at the copyright office white paper that, you know, came out -- >> the music licensing act. >> guest: right. that, i thought, offered some -- there was, i think in the background section of that there was some language that might have been a little bit negative

toward pandora particularly that i might not have agreed with, but when got down to the recommendations i thought those were largely sort of down the road in terms of the way that they sort of were trying to envision a solution to some of the problems that they saw within the music rights licensing regime. and i'd say, you know, recently they've -- i know that they have had some criticism for the input that they gave to the justice department in the consent decree review, for example. >> sure. >> guest: i know some of the outlets that you're talking about have criticized them for them. my criticism is less about them being biased in terms of content or not and really much more about the fact that they, i think, of necessity were speaking purely on copyright law issues, but, you know, this is not a purely copyright law problem. >> sure. >> guest: so whether they were just thinly sticking to their

mandate of commenting on sort of the state of copyright law as it applies to the consent decree issues or whether they were, you know, trying to point to a certain outcome by not addressing antitrust issues, i think they were very clear that they weren't doing that. i don't know the motivations or biases toward it, but that seems like a limitation in the response that the doj got from that. >> host: steve bene, does pandora, spotify, i heart radio, etc., do you face the same scrutiny that an am or fm station would face, and if not, should you? >> guest: hmm. i think the answer to that question is generally, yes, we do. i think all distributers and outlets for popular music are, you know, generally -- well, it's not so much criticism that i would say, it's that, you know, people assume that our interests are, you know, aligned

in the way that we approach music policy, in the way that we approach the music ecosystem. and i think there's a little bit of misconception around that, quite frankly. there are some issues where we very much pay in the same way and through the same mechanisms, and we have very aligned interests in terms of perform. we were talking about the con sent decrees and the way that we pay for compensation rights ascap, and the other pros. and in that case, yeah, pandora has the same kind of -- had the same kind of licenses with ascap/bmi that the broadcasters do and that spotify and apple does. so i think when we're talking about publishing law reform, i think we are very much speaking from a sum experience. but we're -- similar experience. but we're not speaking from a similar experience when it comes to, for example, sound recording policy reform. we have been, you know, one of the, one of the heaviest users

of the section 114 statutory license for sound recordings. well, that's not going to be true going forward because we've just signed some landmark agreements with not only, you know, four of the major sound recording rights aggregators out there, three major labels and merlin, an aggregation of independent labels particularly from europe and others in the u.s., but we've also signed dozens of direct deals with the, with a lot of independent labels. and so we are quickly moving from a statutory payment regime into a private negotiation regime. you know, i know that that is not the case for siriusxm, and broadcast radio doesn't pay at all for the sound recordings that they play. and so, you know, we come from very different perspectives, and i think we have a very different relationship as a result of that with content holders and with the rest of the song writers, artists and the music industry as a result of the different

ways that we've chosen to engage -- >> but on this question of am/fm, you guys have purchased a station in south dakota -- >> guest: sure. >> but last i saw, i think there was a filing in march of this year that said we might actually sell it. has there been a decision whether to sell it or divest that? >> guest: no. and there was -- that was actually, you know, some misinformation out there, unfortunately. >> okay. >> guest: certainly not released by us. >> i thought this was a filing at the fcc from you guys. >> guest: we had asked if it were possible that we could delay -- the fcc asked asked us as a condition of granting the license or the transfer the license to us to put some provisions in our charter documents in order to be able to make sure that we were keeping track of the foreign ownership of the company. >> sure. >> guest: we asked them for a year delay in putting that in front of our shareholders, and it wasn't as a result of wanting to sell the business, it was a result of having other things

that we needed to focus on, so we were hoping to get an extra year just to be able to comply with that provision. the fcc said no, and so we went ahead and put it into our charter documents, and now it's there. >> okay. >> guest: and we have no current plan toss sell the business. -- plans to sell the business. it's been -- what we hoped was, you know, the process of playlisting and providing music to our listeners over the internet radio service would also be a good value add and a good way to sort of revolutionize the way that broadcast radio music was playing. and it's been a really interesting experiment in that way. i don't know that that we're interested in broadening that experiment, but, you know, folks atkxmz are part of the pandora family, and we like having them. >> host: and finally, steve bene, you mentioned at the beginning of this interview that pandora is upgrading its d.c. office. does it ever surprise you how much interaction you're having

as general counsel with the legislators, the regulators? >> guest: no, it doesn't surprise me. by upgrading you mean that we started with nobody -- [laughter] a little over two years ago and now we have a, you know, fully functioning and extremely effective group of folks here that are engaging in our policy issues. but, you know, we think that there's a lot of good that pandora can do in terms of advancing the policy agenda. one of the things we're talking about was the bots bill that alex raised before, and we're also working with members on both sides of congress and in both houses to address the issue of pre-'72 sound recordings. so this great, efficient system where we are paying into a sound exchange and that money gets taken in and paid out to recording artists doesn't apply to records that were cut before february of 1972. and there's no effective way

right now -- although we know which pre-'72 songs that we play on our service -- there's no effective way of getting those people paid. and there's no way of determining how much those people get paid. and so it's really a shame, because what these artists are left with, these heritage artists are left with no other way to get compensated than to file litigations. and class action litigations are about the worst way that i can think of to get compensation to anybody that deserves it. so we are working, like i said, with members in both houses of congress and across the aisle to get a bill put together that would allow these pre-'72 recordings to beaccounted for and paid in the same way and through the same efficient sound exchange mechanism that post-'72 recordings have been for a long time now. >> host: steve bene is general counsel for pandora media, and alex byers covers technology for politico. >> guest: thank you.

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