Silicon Valley loves a good founder’s story. A myth to cling to, a singular moment where lightning struck. A guy in his garage who suddenly had an epiphany on how to change the world.
Oakland, Calif.-based music streaming service Pandora has been no exception. But when the company announced on Tuesday that its founder and CEO Tim Westergren was going to leave together with President Mike Herring and CFO Nick Bartle, it became clear that Pandora might need a new story.
First, let’s recap Pandora’s founding myth one more time: Westergren had been a musician, touring with his not-hugely-successful band, and often playing in half-empty clubs. At times, his band even found its gigs cancelled last minute because they weren’t able to sell enough tickets, as Westergren retold in a blog post in 2015:
“We had driven 400 miles, brought a bunch of fans, and now we were being told we couldn’t play. That moment captured for me the awful challenge that working musicians face.”
Some in the music industry had always been suspicious of Westergren’s memories of being a starving musician. For years, Pandora’s business model had been built on copyright law provisions that allowed the company to act as an online radio network, and play any song it wanted, without having to ask rights holders for permission. That, and the fact that Pandora did what any business would do — push for the lowest possible royalty rates — seemed to belie that founder’s myth.
To Westergren’s credit, the company did eventually strike direct deals with rights holders, and also embarked on an ambitious course to build a kind of one-stop-shop that would touch all parts of a band’s career. Pandora not only built an on-demand music service, but also expanded into music intelligence, and even ticketing.
The business logic behind these moves was to turn a money-losing one-trick pony into a profitable company that could not only survive, but thrive, next to giants like Apple and Amazon. But what Westergren also touted is a way to build a middle class for musicians, and painted a future in which teenagers would be able to tell their parents that they wanted to make a living with music without giving them a heart attack.
The good news for young wannabe-rebels is that their rock star fantasies will continue to shock their parents for the foreseeable future.
Pandora bit off more than it could chew with the acquisition of the online ticketing service Ticketfly in late 2015, and sold the service at a loss to Eventbrite earlier this month. The company also over-extended itself with massive investments in its new on-demand product, and was forced to sell a significant stake to satellite radio giant Sirius XM. That $480 million investment has given Pandora some breathing room, but it apparently also came with some strings attached, forcing the company to start over with a clean slate and force out almost its entire existing leadership.
There are also some signs that these changes may coincide with a shift in priorities. Board member Roger Faxon signaled as much in a statement sent out by the company Tuesday morning, which emphasized that digital radio is “at the core” of Pandora’s business, while its new subscription services are merely “integral parts of our arsenal.” That distinction wasn’t lost on Wedbush Securities analyst Michael Pachter, who speculated in a note to investors that “it is possible that Pandora will scale back on its on-demand subscription ambitions” once it has decided on a new CEO.
With Westergren, Herring and Bartle gone, Pandora now needs to figure out what it wants to be, and how it wants to position itself next to Apple, Spotify and others. In other words: It needs to put its founder’s story to rest, and find a new narrative.