Joe Kennedy, Chief Executive Officer & President of Pandora, the personalized radio service powered by the Music Genome Project, provides his perspective on music, where the industry is heading, and how peer-to-peer lending fits in.

1) Joe, you’re a Harvard MBA, one of the founding fathers of the Saturn car brand, and former President of E-Loan. How and why did you make the seemingly counterintuitive leap to Pandora in 2004?

I fell in love.

Although music has been a passion of mine for almost my entire life, I never even considered working in anything music-related.

Back in college someone once told me “Your dream girl is not the girl of your dreams”. Well, I’ve found that “my dream job was not the job of my dreams.”

Ironically, in 2004 Pandora hired the very same recruiter to fill its CEO slot that Chris and Janina had used back in 1999 to lead a search that ultimately brought me to E-LOAN.

I absolutely loved meeting Tim Westergren, Pandora’s founder, and the more I looked into the music business the more I saw the opportunity for transformational change—change that could make the world better for both those who create music and those who listen to it. I saw the opportunity for the same fundamental change that I had enjoyed creating at Saturn (in terms of what it was like to shop for and buy a car) and the same kind of fundamental change that Chris has envisioned for lending.

And so I dove in.

2) Your Pandora profile notes that you’re the “resident pop music junkie” and that you’ve played the piano for over 30 years; “most of that time has been spent attempting to master Gershwin’s ‘Rhapsody in Blue’; maybe in another 30”.

Who are your favorite pop artists? And what is it about “Rhapsody in Blue” that has you so enraptured?

My list keeps changing—so much so that I’m one of very few people who runs up against Pandora’s limit of 100 stations.

In the last few weeks I’ve created stations based on the Kings of Leon (I just love the lead singer’s voice and I’ve always been a rock fan) and Cascada and Lady Gaga. My 14 year old daughter is into dance music and that’s connected me with Cascada and Lady Gaga.

Probably the station I’ve listened to more than any other over the years is Counting Crows—just a great band (and from the Bay area!).

All of my music training (both performance and theory) is classical…and that may be part of what explains my lifelong love of Rhapsody in Blue—it straddles jazz (the pop music of Gershwin’s time) and classical in a way that is very rare.

3) Like most industries, the music industry has been completely tossed up in the air by the litany of clichés associated with Web 2.0.

For instance, some believe the traditional Rolling Stone Magazine music critic may become obsolete by way of crowdsourcing and real-time citizen music journalism. Others have contemplated the notion that recording full-length albums will be trumped by one-off single releases (e.g. Radiohead). And there’s the rise of virtual bands on YouTube.

What is your perspective on these and other Web 2.0 related trends in terms of what they mean for the future of musicians, music journalism, and the music industry as a whole?

The most important trend in music is that more music is being created than ever before and more music is being enjoyed than ever before.

It used to be that creating a professional sounding record required going to a very high cost studio full of very high cost equipment (think of the Abbey Road studio where the Beatles recorded way back when). Creating copies of those sound recordings could only be done in sophisticated manufacturing facilities on very expensive equipment. And distributing those copies to the public required mastering physical distribution through brick and mortar record stores all around the country.

Today a great sounding record can be produced in an artist’s basement using relatively low cost equipment—and then copied and distributed around the world at essentially no cost using the web.

The result: much more music—great music—and much more listening.

The hardest part in today world is figuring out how to connect a new piece of music or a new band with the people who would enjoy them. The good news is that there is no one right answer: there’s still a place in the world for the Pitchfork music critic…but word of mouth from one person to another is also a phenomenal force. At Pandora we hope to help this new ecosystem by enabling listeners to discover new songs and artists that they wouldn’t otherwise hear.

4) From time-to-time musicians and band managers have posted loan listings on Prosper for the purpose of financing marketing, recording and other related production expenditures. And Slicethepie, a financing platform for the music industry, based in the UK has been quite successful. Do you think there is a future for U.S. musicians/bands to be financed by peer-to-peer lending platforms like Prosper’s?

I do.

It used to be that the only way musicians/bands could devote themselves full-time to their craft was to somehow get signed by one of the major record labels. These labels provided everything to the artist: help recording their music, CD production and distribution, marketing and promotional support, etc.—and financing.

Today, there are many different ways a musician/band can choose to develop themselves. And these choices are no longer great big bundles—it’s much more a la carte. So a band can separately choose who they want help from for recording, which would probably be completely different from who they want help from for marketing, which in turn would be different from who they want help from for touring, etc.

As a result of this unbundling, bands who have taken control of their own destiny also need to separately line up financing for their equipment purchases and operating needs.

In many of these cases peer-to-peer lending via Prosper can make a lot of sense. It is important for the lenders to understand the risk profile of the band and for the band to understand the strict timetable that comes with taking on debt. For bands that have begun to demonstrate some traction—or who are using the funds just to purchase hard assets like equipment—debt may make a lot of sense. For other bands whose development is more speculative, more equity-like solutions may be better.