Tom Conrad: evaluation

Transcript context

…Just on that topic, do you think there's something that you could have done, someone could have done? Do you think there was an opportunity to become Spotify? Or is it the business model and the math formula was set up in such a way that it was near impossible? One of the things that was tough for Pandora was that when we started it, digital music was a category that no investor wanted to touch. It was lawsuits. There was no money to be made. There were relationships with the labels that were completely impossible to nurture. And there had been no big outcomes. I think the biggest exit in digital music when we got going was I think Yahoo had bought Musicmatch for like $400 million. And so that was seen as kind of the ceiling on the opportunity. And along the way we found investors who believed in our vision and invested ultimately hundreds of millions of dollars in the company over its pre-public years. But there was never investor enthusiasm for the company in the category that was anything like the investor enthusiasm that a company like Spotify enjoyed just six, seven years later, Snap enjoyed for its pre-public tenure. And I think part of what was different for Spotify is that the comps were not... Musicmatch was 400 million, they were Pandora at 8 billion, but even above that they were Netflix at 100 billion. And so investors just had this new sort of optimism about what you could do in subscription and in streaming, and Spotify really played that to their advantage in a way that we couldn't because we had gone public and the public market investors were still trying to figure us out. So we didn't have access to capital. It was very hard for us to take the same kind of risks that Spotify took. But then I think we just completely misjudged one really important thing, which is that we were really inspired by disrupting terrestrial radio. Terrestrial radio is the predominant form of music consumption in the country. People spend, I can't remember the exact stats, but by minutes consumed, it's something like 10 times more music minutes a month on radio in the aughts and early tens than on owned music. And the advertising supported sort of radio market was a $30 billion category, and recorded music was $8 billion. And so we had this idea that we're going to reinvent radio, and Spotify and Rdio and Apple Music and the 14 others, Rhapsody, which was Spotify before Spotify, they were all going to chase this smaller owned recorded music opportunity, and that we could be left relatively alone over here going after the less sexy but actually bigger market. And I think we just got it wrong. It should have been obvious that inevitably all of your music in any format was going to be delivered as a stream from the cloud. And that the record labels in particular, they were going to set the terms on what the structure was. And the structure that they preferred was the Spotify structure. And we operated under a different licensing... And we operated under a different licensing regime that they hated, that was a statutory license that we got from the government. the Spotify structure. And we operated under a different licensing... And we operated under a different licensing regime that they hated, that was a statutory license that we got from the government. And it would've been exceptionally risky for us to come out from under the statutory license and do direct deals with the labels, but it was a requirement to play in the world that they imagined as the future, and we should have imagined as the future, too. And eventually, the company got around to it, but it was too late.…

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