I've been telling anyone who would listen that Pandora.com is the best place for musicians to place their music on the web ever since the site went live nearly two years ago. Far more than a webcasting / streaming operation, Pandora is built upon the Music Genome Project, a seven-year long effort to describe the characteristics of music itself - as opposed to its genre, category, or label. When a musician gives Pandora music to add to its databases, that musician is going to have her music played right before or right after other songs that share musical characteristics with that music. Pandora is so good at relating music and leading users through new discoveries, it's often downright creepy. I got a chance to ask Pandora's creator Tim Westergren about the ins and outs of Pandora and how it impacts musicians. Part one of a two-part interview conducted June 18, 2007 follows.

How do musicians get their music into Pandora?

They can send it to us. We accept unsolicited submissions and there's information on how to do that at our website www.pandora.com. We also do a lot of our own research so we have a couple of people who spend most of their time out on the web looking for music turning over every possible stone. And then we have listeners that are constantly sending stuff to us, so we have lots of resources.

What do you call the people at pandora who listen to all the submissions and enter the attribute data into the system?

Musician Analysts.

How long does it take for a Musician Analyst to enter all the attributes of a single song?

It'll depend on the song but anywhere from fifteen to thirty minutes per song.

Do the people with that job ever burn out?

So far, no, actually. People have moved and left the job but nobody has actually said "I'm tired of this, I want to do something else. It's a good gig for a musician.

What happens once data about a song is entered into the system and is found by another person in the organization to be lacking in accuracy? When there is a difference of opinion on what that song's attributes should be, what ends up happening?

We [enter] about 10% of the songs twice. This serves as a kind of blind double-checking. And os we're constantly monitoring mistakes and making sure people are consistent. And if there's a [song] score that's off, we will sit with the analyst and figure out why and make sure it doesn't happen again.

How have major labels reacted to Pandora?

The best way to gauge that is that they all send us their music. And we've had a handful of direct relationships with them to share data on what songs are playing, so the relationship's been very good.

What is the relationship between Pandora and the Music Genome Project?

They are one and the same. This company has been around for about seven and half years. We used to be called Savage Beast technologies and we changed our name to Pandora about two years ago, but the Music Genome Project is what we have been doing since the beginning.

Who does Pandora pay for the right to play music online?

We pay a bunch of different entities. We pay ASCAP, BMI and SESAC, who are the composer's royalty collection societies and we also pay an organization called SoundExchange who pays the performance royalties. All of those organizations turn around and distribute those payments to the artists.

Tell us about the recent royalty increases you have been hit with. Where did these increases come from and how do they affect your operations?

The increases came from an arbitration panel in Washington, DC called the Copyright Royalty Board. It's three judges, and they ruled after hearing about six months of testimony. The rates that they passed are an enormous increase for webcasters. In our case it's a tripling of the performance fee. In the case of other webcasters it can be a ten or twelve-time increase over what they were paying.

And how did this affect your operations? It's my understanding that as a result of the ruling, you changed Pandora to no longer accept connections from non-US listeners.

It's true. These rates only directly impact the listeners who are sitting in the US, but the US rate is pretty much a benchmark for the rates that are being negotiated outside the US, so until this is settled and settled at a reasonable number, we put everything on ice overseas.

Do the performing rights societies (BMI, ASCAP, SESAC) audit Pandora?

We send them monthly reports that detail every single song we've played.

What are self-released musicians getting out of Pandora airplay? Since Pandora plays link straight to sales pages for the song at iTunes and Amazon, an you talk about iTunes or Amazon sales numbers?

At a high level, 40% of Pandora listeners are buying more music since using the service and only 1% are buying less. So it's a very promotional service. A little over half of the music we play is from independent artists or artists on small labels, so it's very much of a "long tail" service. About 95% of the songs in our collection play every day, so it really is a service that is blind to popularity and spreads its performances across a huge range of artists. The results for artists up until now are largely anecdotal in terms of "what's the impact?" We get constant e-mails from artists saying "I suddenly experience a huge bump in my iTunes sales and it corresponded to when I got added to Pandora, or "People have been showing up to my shows in greater numbers and people have been saying the found me on Pandora", so it's all anecdotal but definitely good volume.

Are there any plans to get past the anecdotal stage and to provide play and outlink reports just like you already do to a licensor?

You bet, yeah. We would ideally like to have a situation where artists could go in and look up everything that's happening to them.

Look for Part Two of this Gearwire interview in a few days.