Pandora founder: Spotify “not fundamentally competitive” with radio peer

Despite recent investor concern over the financial future of Pandora and the company’s lowered expectations for the fourth quarter and fiscal year, founder and Chief Strategy Officer Tim Westergren thinks his company can still compete for music lovers.

Westergren said Thursday that while he respects and admires the product that on-demand music streaming services like Spotify offer, these services are “not fundamentally competitive with radio listening,” emphasizing Pandora’s algorithms and discovery elements as Spotify ramps up the competition.

“Their principal product is on-demand listening,” he said. “If you want to listen to Dark Side of the Moon, they’re great.”

Speaking at the Financial Times conference at Stanford Thursday, Westergren emphasized Pandora’s (s p) superior algorithms that predict what music listeners will prefer, contrasting the service with Spotify’s more on-demand streaming service. However, Pandora isn’t the only company that can develop algorithms, and it’s becoming clear that Spotify wants to improve its discovery system to compete. On Thursday morning in New York, Spotify CEO Daniel Elk announced new features on Spotify including algorithmic suggestions and a new Twitter-like music graph that could challenge Pandora’s dominance.

However, Westergren said he doesn’t see Spotify as a competitor, citing a figure that 80 percent of American music listening occurs on traditional radio — in which he includes Pandora — and only 20 percent comes from paid or on-demand music that the listener specifically selects. Westergren put Spotify in the 20 percent category, and dismissed it as being in the same business.

“It’s a lot harder than it looks,” he said on developing the algorithm that suggests songs users will enjoy based on new music and past listening. “And people have tried and failed to compete with us.”

Westergren said if you looked at a graph of Pandora’s growth, you wouldn’t be able to tell when internet music competitors had launched because they had so little impact on the business. Instead, he said traditional radio is who they hope to compete, and critical to that competition will be legislation up for debate that would lower music licensing for internet radio.

“Internet radio has really been suffocated,” Westergren said.