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Pandora has gotten a bad rap from plenty of artists. Some, like Pink Floyd, Rihanna, Sheryl Crow, and others, say Pandora is building its own success “on the backs of hard working musicians and singers.”

On stage at PandoMonthly, Tim Westergren admitted it upsets him when he gets this feedback. After all, he’s a musician himself, which is why he started the company. “This is a personal thing for me, it’s a personal mission,” Westergren says. At the same time, he sees such vitriol as an episodic event. He’s accepted that the whole world is entitled to having — and sharing — its opinions.

At that point Sarah Lacy cut to the chase. “If you guys aren’t the bad guy, and Spotify’s not the bad guy, and musicians aren’t the bad guy, then who’s the bad guy?”

“I don’t think there’s a bad guy,” Westergren responded.

“Who’s keeping artists from being able to make money from us enjoying their music, which seems to be the problem people are complaining about,” Lacy said. “That there won’t be enough money for artists to get paid to create stuff we enjoy.”

Both Westergren and Pandora CTO Tom Conrad had their own perceptions of the issue. For Westergren, the problem is the premise on which the entire music industry was founded. “The industry has for a long time been propped up by a product where you’re paying $20 for something you really wanted to pay $1 for. Maybe you could argue that the bad guy was the one who made that possible?” Westergren says. “That’s a little bit of an unfair label I think.”

Westergren believes the industry has to rebuild itself on a new premise, one that starts with an acceptance that commerce is more challenging when people pay $1 for a product that originally cost $20.

“The key is for artists to begin thinking of themselves as small businesses: I gotta develop my audience, I gotta find ways to make that audience large and get them to contribute in small ways to patronize me,” Westergren says. “I think the Web is well suited for that, but it’s not easy.”

To Conrad, on the other hand, the inherent problem is the number of wannabe musicians and the size of the financial pie available to fund them in the United States. There’s just not enough pie to go around. He pointed to the fact that the US music industry has had, on average, only around $6 billion a year going into it. It topped out at $10 or $11 billion before piracy kicked the legs out from under it.

Conrad, ever the Chief Technical Officer, started crunching the numbers for the audience. “If you do the math, if you’ve got bands with four band members, who all want to make a modest $50,000 a year, it takes a billion dollars to support something like 5,000 bands,” Conrad says. “Even if the money is evenly distributed, a small tens of thousands of numbers of bands could generate from the current spending in music, a $50,000 a year income. At it’s height there were 100 million bands on MySpace.”

Even if that was discounted a huge amount to cut out all the high schoolers “with their three friends,” it’s still millions of aspirants.

He thinks the supposed bad guy, therefore, is the ecosystem as a whole. Or perhaps…it’s the customers themselves. After all, if people were willing to pay more, then more bands could be funded.

“$3 or $5 or $8 or $10 a month for a music service is really really hard for people in this country to come up with it seems, but they’ll happily pay $60, $70, $80, $90 a month for their cable television,” Conrad said, shaking his head. “It’s kind of bizarre.”

[Photo: Geoffrey Ellis for Pando]