Ey Case Compeition Pandora

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  • http://www.stylecareer.com/indierecord_label.shtml
  • http://seattletimes.nwsource.com/html/businesstechnology/2011340931_pandora15.html
  • http://gigaom.com/2010/01/12/pandora-everywhere/
  • Ey Case Compeition Pandora

    1. 1. Purple & GOLD<br />C O N S U L T I N G<br />Cameron Chinn<br />Venkat Rao<br />Elaine Raymond<br />Vance Roush<br />
    2. 2. Objective<br />Goal<br />Position Pandora to create new revenue streams and refine existing ones, for long-term sustained growth<br />NPV = $11,195,609 <br />Purple &GOLD<br />C O N S U L T I N G<br />Situation<br />Analysis<br />Strategy<br />Action<br />
    3. 3. Introduction<br />Situation<br />Purple &GOLD<br />C O N S U L T I N G<br />
    4. 4. Problem<br />Purple &GOLD<br />C O N S U L T I N G<br />Situation<br />Analysis<br />Action<br />Strategy<br />Conclusion<br />Analysis<br />
    5. 5. Industry Potential<br />300K Subscribers<br />48M Users<br />Purple &GOLD<br />C O N S U L T I N G<br />Increasing Partners and Venues <br />In 2008, Pandora built an iPhone app that let people stream music. Almost immediately, 35,000 new users a day joined Pandora from their cellphones, doubling the number of daily sign-ups<br />At the end of 2009, Pandora reported its first profitable quarter and $50 million in annual revenue — mostly from ads and the rest from subscriptions and downloads. Revenue will probably be $100 million this year, said Ralph Schackart, a digital-media analyst at William Blair.<br />Situation<br />Analysis<br />Action<br />Strategy<br />Conclusion<br />Analysis<br />
    6. 6. Broad Competitive Landscape<br />Purple &GOLD<br />C O N S U L T I N G<br />Situation<br />Analysis<br />Action<br />Strategy<br />Conclusion<br />Analysis<br />
    7. 7. Competitive Options<br />Purple &GOLD<br />C O N S U L T I N G<br />Proven that consumers prefer Music Genome Project (recommendations from music experts) over community generated recommendations <br />Situation<br />Analysis<br />Action<br />Strategy<br />Conclusion<br />Analysis<br />
    8. 8. Pandora’s Current Business Model<br />240.4 Million People Ages 14+*<br />29% Stream Online Audiot<br />20% of radio users listen to online <br />radio – Go beyond the browser! <br />69.7 Million<br />Potential Listeners<br />Users<br />Partners<br /><ul><li>Mobile
    9. 9. Home Entertainment</li></ul>-Cars<br />Ad Partners<br />Purple &GOLD<br />C O N S U L T I N G<br />New Revenue Stream<br />New Revenue Stream<br />Subscription Revenue<br />Ad Revenue<br />MAXIMIZE<br />Situation<br />Analysis<br />Action<br />Strategy<br />Conclusion<br />Analysis<br />
    10. 10. Situation<br />Analysis<br />Purple &GOLD<br />C O N S U L T I N G<br />
    11. 11. Strategy Options<br />Purple &GOLD<br />C O N S U L T I N G<br />Situation<br />Analysis<br />Action<br />Strategy<br />Conclusion<br />Analysis<br />
    12. 12. Utilizing the Framework<br />Evaluating Key Factors:<br /><ul><li>Investment Costs
    13. 13. Revenue Generation
    14. 14. Increase in Brand Value
    15. 15. Legal Barriers
    16. 16. Feasability</li></ul>Purple &GOLD<br />Possible Strategies:<br /><ul><li>Pandora ‘Open Mic’
    17. 17. Pandora Video
    18. 18. Pandora International
    19. 19. Refine Current Offerings</li></ul>C O N S U L T I N G<br />Situation<br />Analysis<br />Action<br />Strategy<br />Conclusion<br />Analysis<br />
    20. 20. Framework Analysis<br />Purple &GOLD<br />C O N S U L T I N G<br />Situation<br />Analysis<br />Action<br />Strategy<br />Conclusion<br />Analysis<br />
    21. 21. GE Analysis<br />Open Mic<br />Pandora Intl<br />Pandora Video<br />Refinement<br />High<br />Payoff<br />Purple &GOLD<br />C O N S U L T I N G<br />Low<br />High<br />Low<br />Feasibility<br />Situation<br />Analysis<br />Action<br />Strategy<br />Conclusion<br />Analysis<br />
    22. 22. Analysis<br />Strategy<br />Purple &GOLD<br />C O N S U L T I N G<br />
    23. 23. Overall Strategy<br />Pandora needs Long-Term Sustainable Growth Model  Ad revenue and hopeful subscriptions not enough<br />Short-Term Strategy <br /> “Open Mic” Platform<br />Long-Term Strategy<br />Refinement is sustainable <br />Record Label<br />Product extension around valued artists <br />Purple &GOLD<br />C O N S U L T I N G<br />Situation<br />Analysis<br />Action<br />Strategy<br />Conclusion<br />Analysis<br />
    24. 24. Refinement<br />Lower Time Limit<br />20-40 hours a month <br />11.9% of users<br />21% of hours<br />No direct revenue from users<br />Annual Cost Savings = $586,000<br />First continuance payment at 20 hours<br />Purple &GOLD<br />C O N S U L T I N G<br />Situation<br />Analysis<br />Action<br />Strategy<br />Conclusion<br />Analysis<br />
    25. 25. Refinement<br />Watch Advertisement / Payment<br />Continuance fees:<br />Watch extended ad<br />Pay continuance fee<br />20 hrs - watch 1-min commercial or pay $.25<br />40 hrs - watch 2 1-min commercial or pay $.99<br />Revenue from video advertisement is $90 per 1000 views<br />Purple &GOLD<br />C O N S U L T I N G<br />Situation<br />Analysis<br />Action<br />Strategy<br />Conclusion<br />Analysis<br />
    26. 26. Open Mic<br /><ul><li>Online Battle of the Bands
    27. 27. Subscriber to enter
    28. 28. 250,000 new subscriptions over 3 years = $9,000,000
    29. 29. Registered to vote
    30. 30. $10 per song
    31. 31. Projected participation:
    32. 32. Myspace music pages = 8 million
    33. 33. Year 1 = 200,000 songs submitted
    34. 34. Year 2 = 300,000 songs submitted
    35. 35. Year 3 = 500,000 songs submitted
    36. 36. Available for listening/voting for one week</li></ul>Purple &GOLD<br />C O N S U L T I N G<br />Situation<br />Analysis<br />Action<br />Strategy<br />Conclusion<br />Analysis<br />
    37. 37. Open Mic<br /><ul><li>Incentive:
    38. 38. Potential heard by 50 million listeners (1/6 of the US population)
    39. 39. Your own channel
    40. 40. Weekly “Winner’s Spotlight”
    41. 41. Download the song
    42. 42. Become part of Pandora’s music library
    43. 43. Set-up
    44. 44. Top ten songs listed on home page
    45. 45. See all page
    46. 46. Searchable by genre, region, artist
    47. 47. Thumbs up, thumbs down
    48. 48. Fits with Music Genome Project (Core Competency)</li></ul>Purple &GOLD<br />C O N S U L T I N G<br />CROWD-SOURCING<br />Situation<br />Analysis<br />Action<br />Strategy<br />Conclusion<br />Analysis<br />
    49. 49. Purple &GOLD<br />C O N S U L T I N G<br />Situation<br />Analysis<br />Action<br />Strategy<br />Conclusion<br />Analysis<br />
    50. 50. Joe Guitar18-34 aspiring musician<br />8M Myspace Music <br />Artists<br />Purple &GOLD<br />C O N S U L T I N G<br />Situation<br />Analysis<br />Action<br />Strategy<br />Conclusion<br />Analysis<br />
    51. 51. Online Record Label for Indie Artists<br /><ul><li>Access to artists with established following (Open Mic)
    52. 52. Ability to gauge where concerts would be on demand and what demographic to target
    53. 53. Data to track most popular music trends
    54. 54. Established Distribution Network
    55. 55. Market Potential: Indie Market
    56. 56. The global music market is approximately $40 to $48 billion
    57. 57. 30% of the global music market belongs to indie labels ($12 to $16 billion)
    58. 58. Internet sales in 2004 account for 6% of overall units sold</li></ul>Purple &GOLD<br />C O N S U L T I N G<br />Situation<br />Analysis<br />Action<br />Strategy<br />Conclusion<br />Analysis<br />
    59. 59. Competitor Reactions<br />Open Mic<br />There may be imitation, but Pandora will have the first mover advantage<br />Indie Online Record Label  <br />Competitors may start their own record label, but Pandora has a larger user base in the US, therefore more potential fans than the competition<br />Purple &GOLD<br />C O N S U L T I N G<br />Situation<br />Analysis<br />Action<br />Strategy<br />Conclusion<br />Analysis<br />
    60. 60. Strategy<br />Action<br />Purple &GOLD<br />C O N S U L T I N G<br />
    61. 61. Financials<br />Revenue Assumptions<br />Purple &GOLD<br />C O N S U L T I N G<br />Situation<br />Analysis<br />Action<br />Strategy<br />Conclusion<br />Analysis<br />
    62. 62. Financials<br />Cost Assumptions<br />Purple &GOLD<br />C O N S U L T I N G<br />Situation<br />Analysis<br />Action<br />Strategy<br />Conclusion<br />Analysis<br />
    63. 63. Financials<br />Purple &GOLD<br />C O N S U L T I N G<br />NPV = $11,195,609<br />Situation<br />Analysis<br />Action<br />Strategy<br />Conclusion<br />Analysis<br />
    64. 64. Timeline<br />Launch ‘Open Mic’<br />Evaluate Feasability of Online Record Label<br />Implement Video Ads<br />Purchase TV ads on MTV<br />Purple &GOLD<br />2011<br />2012<br />2013<br />C O N S U L T I N G<br />Performance Analysis of Initiatives<br />Web Still Ads on Facebook & MTV.com<br />Purchase Web Video Ads on Hulu<br />Purchase Ad Banners at Concert Venues<br />Situation<br />Analysis<br />Action<br />Strategy<br />Conclusion<br />Analysis<br />
    65. 65. Action<br />Conclusion<br />Purple &GOLD<br />C O N S U L T I N G<br />
    66. 66. Competitor Analysis<br /><ul><li> Limited usage of “Next</li></ul> Track” option<br /><ul><li> No song search capability</li></ul>Personalized Radio<br />Type<br />Advantages<br />Disadvantages<br /><ul><li> Individual song analysis
    67. 67. Free to use online
    68. 68. User friendly interface
    69. 69. Portable option
    70. 70. Complex user interface
    71. 71. Recommendations requires</li></ul> software download<br /><ul><li> Radio based on genre
    72. 72. Widespread use
    73. 73. Social networking</li></ul>User Radio<br /><ul><li> Preset stations only
    74. 74. Subscription fee
    75. 75. Stations don’t play desired</li></ul> music<br />Streaming Radio<br /><ul><li> Brand-name recognition
    76. 76. Portable
    77. 77. Cost per individual song
    78. 78. Many alternatives
    79. 79. Only accessible for credit</li></ul> card holders<br /><ul><li> Portable
    80. 80. Song search capability</li></ul>Digital Downloads<br />
    81. 81. Financial Projections<br /><ul><li> Expanding user base
    82. 82. Increasing user referrals
    83. 83. Growing subscription</li></ul> rates<br />Pandora begins to expend resources on advertising, resulting in:<br />Revenue by Source<br />200720082009201020112012<br />200720082009201020112012<br /> Advertisements Subscriptions<br />500% growth in user base over 5 years increases revenue over tenfold.<br />Expected Financials<br />Revenue and EBIT<br />Background | Market | Competition | Business Model | Financials| Exit Strategy<br />
    84. 84. Financial Calculations<br />
    85. 85. Revenue Calculations<br />Revenue Calculations (all numbers are averages)<br /><ul><li> Benchmark of $14 million in 2007
    86. 86. CPM $10-50 based on type of advertising package
    87. 87. Users go on 2-3 times per week for 2-3 hours</li></ul>Increase in user acquisition rate based on continuation of viral growth and implementation of direct advertising and new products.<br />Revenue sources divert from advertisements to subscriptions. While ad revenue continues to rise, its rate of growth decreases as number of users increases.<br />Percent of Overall Revenue for Each Source in a Given Year<br />
    88. 88. Market Trend Calculations (Cont.)<br />37.56% Increase of Broadband users increase per year<br />39% of Internet users use Streaming Audio<br />x<br />37.56% Increase of Broadband users increase per year<br />14.5% of Internet users use Streaming Audio<br />
    89. 89. All Competitors<br />
    90. 90. Relationships Between Labels & Media<br /><ul><li>Case Study
    91. 91. http://www.fabchannel.com/
    92. 92. Online Concert Archive
    93. 93. Very Popular in Europe
    94. 94. BUT record labels hurting
    95. 95. Hesitant to make any deals with strictly web companies
    96. 96. Radio vs Online Radio Dichotomy
    97. 97. Cash is King!</li></li></ul><li>Pandora and the iPhone<br /><ul><li>Users are buying about a million songs a month now from these affiliate links on Pandora
    98. 98. 20% are coming directly from Pandora’s iPhone app, which includes an easy link to open the iPhone’s iTunes app, and buy a track.
    99. 99. Another feature driving affiliate sales is the bulk music purchase option. This allows you to bookmark songs on Pandora, and with one click buy them all on either iTunes or Amazon.
    100. 100. 10% of web users who are buying music through Pandora are using this bulk buy feature</li></li></ul><li>Pandora Projected Revenue<br />At the end of 2009, Pandora reported its first profitable quarter and $50 million in annual revenue — mostly from ads and the rest from subscriptions and payments from iTunes and Amazon.com when people buy music. Revenue will probably be $100 million this year, said Ralph Schackart, a digital-media analyst at William Blair.<br />
    101. 101. Pandora Playing Everywhere<br /><ul><li>Devices made by LG, Samsung, Sony, Sanyo, Haier, Divx, Toshiba and Panasonic
    102. 102. Biggest boost – embedding Pandora in automobiles
    103. 103. Ford, Alpine and Pioneer are three companies that are going to be putting Pandora inside their cars and automobile music systems, respectively.
    104. 104. The service will piggy-back on 3G wireless connections on the latest generation of cell phones.
    105. 105. Nearly 47 percent of radio listening is in the car</li></li></ul><li>Imeem and Last.fm partner with 4 major record labels<br />Imeem<br />http://mashable.com/2007/12/10/imeem-universal/<br />Last.fm<br />http://mashable.com/2008/01/23/lastfm-free-music/<br />
    106. 106. Fired Customers<br />“Fired” Customers<br />35% choose not to watch commercial or pay<br />>40 hr users are subscribers or pay<br />So, 20-40 users are most unprofitable<br />35% of 20-40 hr users = 666,400 users<br />Only 4% of total users, but save royalty costs <br />
    107. 107. Risks<br />Watch ad v. pay<br />Users don’t pay or watch<br />Deters users from site<br />Open Mic<br />Lack of participation in contest<br />Lack of new users/subscribers<br />Advertising costs exceed budget<br />Lack of awareness<br />Quality control<br />

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