Moving away from mobile for a second, Pandora was kind off announced in Australia by Holden...
JH: Kind of? What have you been reading?
It was on a slide for a car that Pandora was coming, and then you guys launched a month or two later…
JH: I didn't know that you'd noticed. We launched here in the middle of December, and it was pretty low key. This is not a company that does a lot of splashy advertising, big events etc. It's a company that has spent a lot of time and effort on its product and the people who use it.
We operate very much on an advocacy model, rather than an advertising model. People who download and use Pandora generally recriuit eight others, and that's the best way to get the product into somebody's hands, having someone you know and trust tell you "hey, I've just found the best secret in music ever, you need to download it to your phone."
Looking at the numbers build, that advocacy model is holding as true, if not truer here in Australia as it does in the US.
For Pandora here it's just me here on the ground - I work out of my handbag with an iPad and two pairs of shoes - and I watch those numbers grow 12-15 per cent a week and I can see that advocacy model at work.
Do we have Australian figures?
JH: I have Australian figures, but it's not something we're going to be prepared to talk about for a while. We are in audience building mode, that it my remit.
I will be moving out of my handbag and my two pairs of shoes in May, I've made my first hires here, I've got premises, we'll be moving into Surry Hills and from there on we'll really be growing this company as fast as we can.
We're seeing a lot more emphasis on in-car entertainment at the moment, and following on from that Holden announcement last year - is that the next big growth area for Pandora? Is that what we can expect from you next?
JH: Pandora is already on 85 manufacturers of cars, obviously primarily out of the US. And over time we'll see those relationships extend to Australia and New Zealand.
When people listen to music, there are two ways that they do it. There's an active listening mode and a passive listening mode. And it turns out that about 80 per cent of the time we're listening to music passively.
20 per cent of the time we're in active listening mode, and that's where you use a Spotify or a MOG or an Rdio or your iTunes collection or physically put CDs in and out of a drive, where you are actively dictating the type of music you want to listen to.
The 80 per cent of passive listening is where music is just playing. And that's the end of the spectrum where Pandora plays. We play in that passive music space as opposed to the active music space where you see a lot of the on demand players.
Bringing that back to the car, just over 50 per cent of that passive listening is done while you're in a vehicle. Entertainment is becoming a real differentiator in the auto space, mainly because we've moved on from differentiators being around safety and fuel economy.
When you buy a car now, it needs to tick the safety box, it needs to tick the economy box, so a lot of manufacturing in cars, the competition has now moved into the entertainment space.
We saw this a few years ago when everybody was clamouring over the DVD screens in the back of the car, and now we're really about the choice of entertainment, centring on music.
For Pandora, it's a case of right place, right time. As I said, we're on 85 manufacturers of cars in the US, and we'll see that extend out here.
Pandora in the car has been a major feature. For example, in the US, Honda released two models over Christmas, and the advertising featured the Pandora integration.
We'll see this market go in that direction here, but the life cycle of a car is around 11 years, so it's a slower burn here for us.
Considering everything you just explained, is there a real drive to try and speed that process up locally?
JH: That's the in-car integration. Already, a lot of cars are Bluetooth enabled, so I listen to Pandora through Bluetooth in my Tiguan.
We're also very actively working with aftermarket stereo manufacturers - so JVC, Pioneer - all those models are shipping with Pandora in the US and increasingly in Australia.
Interestingly enough, the first two roles I hired here for Australia and New Zealand are business development roles. And those roles will be working with device manufacturers that are both local to Australia, as well as fast tracking the relationships that we have with the thousand providers we have in the US and enabling them for this market as quickly as we can.
Has there been a big take up on the paid version of the app?
JH: We're not actually running any adverts here in Australia yet, we're just in audience building mode. Strangely enough, there are quite a big number of people who have subscribed, despite the fact that there's not really a value proposition here.
And I get people saying to me all the time that they want to pay. It throws light onto the argument that people will pay for content they love.
