Transcripts For CSPAN2 The Communicators 20140811 : vimarsan

Prison. Watch that interview at 7 p. M. Eastern here on cspan2. Cspan2, providing live coverage of the u. S. Senate floor proceedings and key Public Policy events. And every weekend, booktv. Now for 15 years the only Television Network devoted to nonfiction books and authors. Cspan2, crypted by the cable tv created by the cable tv industry. Watch us in hd, like us on facebook and follow us on twitter. Host and our guest this week on the communicators is Chris Harrison who is Vice President at pandora media. Mr. Harrison, what is pandora, and how does it work . Guest peter, thanks for having me. Pandora, as you may know, is a personalized Internet Radio service. What distinguishes pandora is our technology, primarily our music genome project. So pandora was founded by tim westergram, a musician himself. He grew frustrated as a composer because it was difficult for him to communicate with directors. A director would say i want music that sounds like x, and tim would say, well, this sounds like x, and the director would say, no, no, no, i want something that sounds like x. And tims idea was that you could break down music into its constituent parts or its genes, and then you could map those genes across up to 450 different characteristics so that you could create this common taxonomy that looked at every song. Just by way of an example, think of vocalists, think of nora jones, if you know her music, very light and brent think delivery breathy and then compare to bob dylan who has a very distinct, nasal tone. Thats just one way in which we will categorize a songs genes. So we used the music genome project as a starting point to analyze our music. We also use collective intelligence, so think of that as how a song plays for everybody on the service. So if you have a station that you seated with the allman brothers, for example, we can tell how well songs by the Marshall Tucker band plays for everyone who has a similar station. We also use collaborative filtering which you can think of as sort of the individual level kind of analysis. So if both you and i happen to look a song by the allman brothers and you happen to like this old cowboy by the Marshall Tucker band and im giving away a little bit of my musical tastes in these examples, i know theres some statistical likelihood that i will also like this old cowboy like by the Marshall Tucker band. So we take those three ways of looking at music, and then listeners come on to the service, and theyre asked to give us the name of a song, an artist or a genre of music, and they start the service, and we deliver a personalized station for them. So lets say youre playing a norah jones song. When it plays, who gets paid . Guest in that context, were going to pay two different royalties. Copyright is a very complex beast and music licensing even her so. When we play music on pandora, were actually playing two different copyrights. One is the recording. Thats typically owned by the record label, and thats norah jones version, the recording she made of the song. Were also paying host so the Record Company gets paid. Guest the Record Company be gets paid. Host okay. Guest the song and the lyrics, think of it as the sheet music, those are typically controlled by the music publisher, so were paying a royalty to the music publisher as well. Host and how does pandora make money . Guest were primarily an adsupported business. So we have a Subscription Service which allows listeners a monthly fee and not receive ads, but the vast majority of our listeners and revenue derives from our sale of advertising. Were very good, we like to think, at delivering targeted ads. You may have read recently about our political segmentation and our ability to target ads baylesed on political based on political party. Our Value Proposition there is, again, because were a onetoone medium as posed to traditional am fm radio where we play one song to whomever happens to be tuned into the station at that particular moment. We know what song youre listening to at any time, in fact, we know what device youre listening to it on. So, for example, were integrated in many car models. Listening in the car has historically been a place where a lot of people consume listening in am fm. We have about four million activations this car, and we can tell when youre in the car listening to pandora, so we can actually target ads to those listeners and make those ads relevant to their driving experience. Host Chris Harrison, lets talk about some of the issues that pandora will be facing, and i want to read this quote from Carrie Sherman at a recent congressional hearing. He says that copyright, music licensing, i should say, is an antiquated, complex, timeconsuming licensing regime that must be fixed. Do you agree with that . Guest well, i think theres certainly some areas where we might be able to improve the process. Right now pandora operates under what are typically referred to as statutory blanket licenses which means we can get the rights to play all of the music on our service from, essentially, two sources. We can get all of the rights from the record labels through the statutory license which congress crypted back in 19 t 5 created back in 1995. So its very simple for us. We follow certain rules that congress laid down in order to be entitled to use that license, but as hong as we follow those rules, we can play any music we want. On the publishing side, its similar. There are two organizations primarily that collect royalties on behalf of their songwriter members. And, again, we can play any song that we want based on those two licenses. So theres some tremendous efficiencies for us in the existing system that facilitates innovation and allows innovators like us to enter the market relatively easily. Host well, to talk about some of those issues, joining us is haley siewk yam ma of the washington post. Thanks for having me. I know that you were on the hill to talk specifically about the concept decrees that go on consent decrees, so could you talk about what those are and sort of in the face of this changing technology what changes you would like to see . Guest well, again, the consent decrees, they were put in place many years ago by the department of justice which had filed antitrust claims against the two performing rights societies. Those consent decrees exist to mitigate whats per sued perceived as the market power that derives from licensing copyrights collectively. The publishers have voiced some concern about the current state of licensing, and the department of justice is currently reviewing those decrees. Theyve asked for public comment, and i anticipate that, you know, when those comments come out, well take an active role in reviewing those and voicing our opinions. Um, and i know kind of speaking of royalties and sort of i mean, the Music Industry has changed so much, its been a very much, just in the way as consumers look at it, right . The way that they get their i think the system so complicated and there have been so many changes, but from a consumer point of view, people are really interested in saying, well, how do you keep prices low and headache sure this industry can make sure this industry can keep thriving . Im just interested in what you see as the pathway to doing that. Guest so, you know, pandora is radio. Thats how the service was envisioned initially when it launched in 2005. Adsupported radio has a long history in the u. S. Very culturally significant because it allows the widest dissemination of popular music to listeners. They dont have to pay for it. We are primarily adsupported and view ourselves as an extension of that adsupported am fm radio market, you know . Because were adsupported a listener doesnt have to pay 10 a month for a sub description to the subscription to the service. I think in the u. S. Were over 80 penetrated with internet access, so we are integrated in about a thousand different devices. Not just your mobile phone be, you can actually listen to us on a refrigerator now. So this ubiquity of access for us is really a way to reach listeners really across the entire socioeconomic spectrum and enable them to listen to the music that they love even if a hoping am fm broadcaster doesnt have a station that broadcasts that music. Host mr. Harrison, to follow up on haleys question about the changing landscape of the Music Industry, how are you different than a terrestrial Radio Station . Are the rules different for you than they are for a traditional ah fm station . Guest there are different rules. As i mentioned, copyrights complex. There are different licensing regimes that operate to. I think fundamentally the technology is different can, right . A broadcast by it name is just that. You are playing a single song to all of your listeners tuned into that station. Were a onetoone technology, so we deliver a station specifically for you. And that enables us to do some things that broadcast radio cant. We can be more personalized than broadcast radio. It allows us to really deliver content that might not be available in your local broadcast market. So if you happen to really like jazz music or bluegrass and and theres not a local station broadcasting that venn re, you can still genre, you can still access it through your pandora account. Host first of all, what are ascap and bmi . Guest the two largest performing rights societies. They represent Music Publishers and songwriters. Host do they support pandora and other online Radio Stations . Guest well, i think they recognize that online listening is the future, that were if youre look at pandoras share of all radio listening, its increased steadily since our launch. I think we last reported were just knot of 9 north of 9 of all radio listening. So were part of the musiclistening landscape, and, you know, we provide a really valuable platform for artists and song writers to have their music herald. Host but werent you recently sued by some of the big Record Companies for not paying licensing fees . Did i get that correct . Guest so theres a suit pending right now in new York State Court over records that were recorded prior to 1972. The copyright act, were into the complexity again. The copyright act until 1972 didnt recognize sound recordings for federal copyright at all. They werent they didnt enjoy a performance right which is what would happen when you play their music on pandora until 1995, and even then congress made the decision at that time not to include for performance royalties those recordings made before 1972. So even the Copyright Office in late 2011 or early 2012 concluded that these pre1972 recordings arent entitled to a performance royalty under federal law. Host so elvis, the supremes, rosemary clooney, they can all be played for free . You can take that product and play it for free on pandora . Guest well, well still pay the songwriter to the extent the song is still subject to copyright. But, yes. I mean, again, the copyright act makes all sorts of choices. Theres a famous songwriter from the 1920s, w. C. Handy, who recorded many very popular songs. A song he wrote in 1920 is in the public domain. So his estate wouldnt receive any royalties from pandora for the performance of his song, the musical work through ascap and bmi. One of his songs was recorded by Stevie Wonder in the 1980s. Well, Stevie Wonders going to get a royalty as the recording artist because the song was record after 1972. Recorded after 1972. Its horribly complex, but it is what it is, and congress has set out the rules, and, you know, thats the world in which we find be ourselves. Host haley sukiyama. Certainly weve seen with the rise of youtube and usergenerated sites, people are putting their work out there on their open. But if they want to make it big, what are new considerations they have to make as songwriters to think about this new industry and sort of the landscape of it . Guest well, youre right, there certainly are more platforms for artists to be discovered than in the past when artists relied primarily on am fm broadcast radio. On our service we play about 100,000 different artists every month. 80 of those are not played on any other form of radio. So there really is a value to these new platforms for artists to be discovered and to connect with fans that they, thatll love their music. Theres a great example, i dont know if youre familiar with the band bronze radio return, its an indie pop band from connecticut. They sound somewhat like mumford and sons. So in 2009 before mumford and sons launched in the u. S. , this bronze radio return had about 1500 spins on pandora in the entire year of 2009. 2010 comes along, mumford and sons breaks, theyre on the grammys, theyre very popular, and people start seeding stations on pandora with humford and sons. Were able to say, hey, if you like the mumford and sons, you might like this new bammed, bronze radio return. Last year that band had 8. 4 million spins on pandora. Its just a great example of, you know, the value of our platform in helping artists connect with the fans that love their music. And how do you balance how, you know, because im sure if people go into pandora and they say they want to hear norah jones, how do you balance that youre surfacing the artists but also people get what they want . Guest part of the secret sauce, you know . Laugh youre absolutely right. We spend a lot of time analyzing our listener behavior and looking at, you know, are we playing enough new music for listeners . Are we playing too much . And, you know, were we have lots of data scientists who spend lots of time doing math that i cant understand to try and solve that. Host representative john conyers has, and some others, have introduced the bill called the respect act to get more music royalties to artists pre1972. Do you support that . Whats the danger in that . Guest well, i think fundamentally its unfairly targeting Internet Radio because the only services that would have to pay that royalty are internet services. Weve talked about publicly that we would support full federalization of pre1972 recording. Host and what does that mean . Guest well, there are important be protections built into the copyright act. Its not just rights that are granted to copyright owners, there are important protections like fair use, the ability of libraries to keep archival copies, theres actually rights of termination of transfers that artists have. All of those protections are built into the copyright act that arent part of the respect act. If congress wanted to fully federalize and provide not just the rights to these copyrights, but also the protections for consumers and libraries and artists, then wed support them. Host is this, in a sense, new technologying versus Old Technology versus old Line Companies . Weve seen some of these battles and issues in tech issues before. Guest i think theres always been a tension between content owners and technology. I mean, if you go back, there was a time when publishers were against radio, when terrestrial radio launched, you know . You look at beta and vcr tapes, you look at Digital Audio tapes, theres always a tension between new technology and copyright owners as the market tries to figure out, you know, are consumers going to like this . And if they do, what does that mean to the rest of my Business Model . Host mr. Harrison, congress has been deliberating for quite a while on copyright law. What would you like to see done from your perspective . Guest well, first of all, applaud chairman goodlatte for his leadership in looking at these issues. I had the pleasure of testifying before the ip subcommittee last month, you know . Theyre taking what i think is the appropriate approach which is a comprehensive and full look at all of the issues associated with copyright. You know, and hopefully what coming out of this is a comes out of this is a real productive conversation of all of the stakeholders including, frankly, the consumers at the end of the day who benefit from innovating technologies like pandora and that we can find a way to improve the system where it can be improved. I know that pandoras also increasing its presence in d. C. , that youve opened an office here. What are some of the other issues that youre looking at in terms of guest sure. Obviously, music licensing and copyright reform is top of mind for us. But, you know, were clearly focused on issues that are of importance be to Technology Companies importance to Technology Companies generally. So patent reform, net neutrality, privacy issues, those kinds of things. Host you have described or pandoras been described by your folks as a big data company. What does that mean . Big data provider . Guest well, we have, we track every interaction that we have with our listeners. So when you log on to the service, we know youve logged on. When you launch a station, we know what station youve launched. We know what songs you listen to, and we have this feature thumbing up and thumbing down which is exactly what it sounds like. Theres a little thumb icon on your screen, and if you like a song, you thumb it up, if you dont, you thumb it down. We keep track of those interactions. We have more than 30 billion of those captured since we launched the service. That allows us to do this political segmentation that i talked about earlier where we can take the information that we have and look at what listeners are most likely to respond to. Thats the real value added that we bring to our advertisers, is that ability to target against particular demographics. When a user launches the service for the first time, we ask ask them for their gender, their age and their zip code. That in combination with their listener behavior allows us to more precisely target ads which we think are going to be more relevant to the listener, provide more value to the advertiser. One of the things i think thats really interesting and exciting for us is weve started talking recently about, you know, how can we help the Music Industry in general with some of this information. Our founder, tim, talked recently about efforts that we have underway to look at exposing some of that information to record hables or recording artists record labels in ways thatll help them grow their business, you know . As we talked about with mumford and sons and bronze radio return, you know, information that we can provide to them might help them make marketing decisions. We have a great example, theres a band called fallout boy. They came into our office, and we showed them how their music was performing on the service, and they discovered that they were extremely popular in Salt Lake City, and theyd never performed there. So the next time they went on tour, they booked three shows in Salt Lake City and sold all of them out. So theres great examples where we can actually provide value back to the recording around itses and labels and others artists and labels and others in the industry, and thats something that were really excited about exploring. Host so, mr. Hair soften, to go back to the political side of this, if somebody is listening to fallout boy, are they a democrat or republican . [laughter] guest unfortunately, that gets back to some of the math that i dont understand. You know, again, we look at whats your zip code, whats your gender and age, how that all manifests through the secret sauce is part of that secret. Host and who developed that . Guest its all data scientists. Host how many employees . Guest were north of 1300 now, i believe. Vast majority involved in sale or sales support. You guys have played around a lot with looking at mobile use and desktop use and as people kind of rely more on their mobile devices, youve had to adjust the way you put limits on mobile devices. Can you just talk a little bit about what you learn in having to change those models and what youre finding out about peoples habits . Guest sure. The it really it is fascinating to look at the sea change this listener behavior. We were years ago, you know, just a couple years ago we were predominantly listened to on the december k top. Today i believe were close to 80 of our listening now occurs on mobile devices. It creates a lot of challenges, obviously, for the service. Youve got a much smaller screen, so how do you convey relevant information to the listener and do it in a way thats simple and easily navigable. Unfortunately, advertisers havent moved over to mobile as rapidly as listeners have, and so the monetization of our mobile listeners is slightly behind where we are on the desktop. Were extremely proud of the efforts weve made around mobile monetization. Were third behind facebook and and google in terms of our ability to monetize our mobile listeners. You know, weve pioneered a lot of the new ad products for mobile listeners. Audio advertising over mobile devices is a really new and exciting form of advertising. We do lots of research around how well ads perform. Because we dont monetize as well today on mobile as we do on the desktop though, the royalties we pay are the same. And so last year we implemented some measures to try and slow the growth of listening on the mobile device in order to give us an opportunity to have that monetization catch up to the desktop. We were able to do that and have are removed those caps is be have removed those caps. We did the same thing years ago on the desktop when we had a big spike in listenership, and we needed time to have the revenue, the monetization catch up with the listening. Is that sort of a problem you have overall, the larger you get, the more royalties you pay . Is there a way to get away from that sort of loop . Guest im not sure theres a way to get around it. Its certainly a positive problem to have. We keep growing listeners, listening hours, that provides more opportunities to sell advertising. Weve really focused on local ad sales. If you think about am fm broadcast radio, the vast majority of revenue get generated at the local level. Car dealerships. Guest exactly. Were in 37, i believe, local markets today with sales reps on the street knocking on dealership doors selling ads in direct competition with their local am fm broadcasters. So, you know, thats really where we see the biggest opportunity for us to increase that monetization. Host mr. Harrison, could congress destroy your business if it changes the laws in a surgeon way . Guest in a certain way . Guest well, i dont know about that. I think, again, the music licensing is a very complicated set of rules, and were excited to participate in chairman goodlattes review of those. And, you know, were confident that whatever comes out of this next congress will, our voice will be heard, and congress will do the right thing. Host do you foresee copyright reform in this congress . Or will it carry over . Guest i am not a congressional expert. I know theyve got recess coming up and then the fall elections, so its hard for me given that the hearings themselves, i dont believe they finished all of the hearings they want to have. So i find it hard to believe that it would get finished this year, this congress. Host weve talked quite a bit about congress, and haley asked about some other issues. How much time, influence does the fcc have on pandora . Guest other than our acquisition of kxmzfm, our raid wrote station in south dakota, were not an fccregulated industry. Host why did you buy a terrestrial Radio Station . Guest we bought it for a number of reasons. You know, as i said before, we really view ourselves as radio. We consciously set out to create a radio product. We happen to deliver that product over the internet, not over fcclicensed spectrum. But we see ourselves as radio, and we see there, you know, there are things that broadcast radio does well particularly at the local level. We thought we could have some valuable learning. And this provided an opportunity for us to try and test some of that out. It also happens to be that terrestrial broadcast railed owe pays less radio pays less in royalties than pandora does, and owning a terrestrial Radio Station was a vehicle for us to take advantage of a better licensing regime. Host Chris Harrison is Vice President of pandora media, and haley sukiyaha is with the washington post. Thank you. Guest thanks