Pandora Founder Takes to Own Airwaves in Royalty Battle

Tim Westergren Wages a Political Fight

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In an unlikely entry into the political campaign season, Pandora founder Tim Westergren is taking to his own airwaves to urge listeners to contact their congressional representatives about what Pandora calls "discrimination against internet radio."

Pandora ads
Pandora ads

In the audio ads, Mr. Westergren cites Pandora's "dramatically unfair music costs" that ate up more than 50% of the company's revenue last year. The audio ads run in tandem with display ads containing the name and phone number of a listener's representatives. Ads on the Pandora mobile app include tap-to-call functionality so listeners can easily call their local senator or house rep. Mr. Westergren also sent e-mails to some users.

The in-house ad campaign was timed to launch alongside the introduction of a bill last week called the "Internet Radio Fairness Act." The bill proposes that internet radio services pay royalty rates equal to cable and satellite radio operators.

Pandora signed a royalty agreement back in 2009, but Mr. Westergren and the company believe the rates are still too high; in the audio ad, he says that Pandora pays six times more than satellite-radio provider Sirius XM.

In this fight, the record labels hold most of the cards, but Pandora has become the largest radio provider in many large markets, giving Mr. Westergren a substantial bully pulpit.

The ads have already resulted in increased dialogue with congressional representatives and their staffs, according to Pandora's new PR chief, Eric Brown. He said he wasn't sure if any new co-sponsors have signed on as a result of the marketing push, but that the campaign would continue until it gets some more results, but end in the weeks leading up to the election. Mr. Brown declined to disclose the value of the ad space the company has used to run the campaign.

Pandora is targeting the ads to areas of the country represented by congresspeople who have previously shown support for pro-internet legislation by taking steps such as opposing the SOPA and PIPA bills, according to Mr. Brown.

At the same time, some could say the campaign calls attention to the extent to which Pandora's future hinges on lower rates. Mr. Brown contended that the business is in a good position, but would be in a better one with a new royalty structure.

"To those who say we could not survive without this," Mr. Brown said, "go back and look at how healthy and strong our financials were in the last quarter, which I say shows the business model is fine."

Pandora reported revenue of $101.3 million in the quarter reported last month. The company lost $5.4 million in the quarter but said it would have broken even with the exclusion of about $6 million in stock-based compensation, which management does not consider core to the business' operations.

Mr. Brown joined Pandora earlier this month, after leaving a similar position at Yahoo in April when former CEO Scott Thompson brought in a former colleague to run PR.

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