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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 Ey Case Compeition Pandora Presentation Transcript

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