2. What is Pandora?
● Mission: “To play only music you'll love. (OK, we've
added comedy as well so we're also up for playing
some jokes you'll love.)“
● Type in favorite artists, songs, composers, genres (or
comedians) and Pandora provides up to 100 unique
“stations”
● Thumbs UP/ Thumbs DOWN Option
3. Music Genome Project
● Uses Music Genome Project to provide a unique tailoring of music for each
listener
● “The most comprehensive analysis of music ever undertaken.”
● Analyzes a world of songs that span over 100 years
● Suggests songs based on songs listeners give a thumbs up and down to
● Each song is listened to and analyzed for specific characteristics by
"musicologists"
● The Music Genome Project is updated daily basis
4. Organizational Information
● Headquartered in Oakland, CA
○ Other Offices: New York, Los Angeles, Chicago,
Detroit, Atlanta, and Dallas
● Pandora is a public company whose stock is traded on
the NYSE at a price of $10.38 as of September 25,
2012
● Joseph Kennedy is the company Chairman and CEO
● Revenue FY2012: $274,340,000
5. Statistics
● Over 125 Million registered users in the United States
● Over 900,000 songs in its catalog
● Over 15 Billion Thumbs Up
○ show they’re doing a good job of providing users
songs they like
7. Where to access Pandora
● Pandora has become an App on all smartphones
making their music accessible everywhere
● Available on over 600 different consumer devices
● Many stand alone players
○ Roku
○ Slim Devices
○ Apple products
○ Blackberry
○ Android
○ Windows Mobile devices
8. Types of Subscriptions
● Free Subscription
○ Can listen to music at any time
○ advertisements
● Paid Subscription
○ Can listen to music at any time
○ no advertisements
9. Pandora's Biggest Fear
Apple
● Apple Inc. is planning to introduce its own competing online custom radio
service through iTunes.
● The day after Apple’s plans emerged earlier this month, Pandora Media’s
stock plunged 17 percent and has still not recovered.
● Apple’s iTunes store had a 64 percent share of all digital music sold in the
United States for the second quarter
● With Apple’s reach, and its ability to pre-install an app to every mobile
device it ships, any Internet radio service it offers could quickly
● build a huge following.
10. Risk Factors
Risk Factors that could cause or contribute to differences from
projected financial status include, but are not limited to:
1. Competitive Factors
2. Ability to continue to innovate and keep pace with changes in
technology and our competitors in hypercompetitive markets
3. Ability to increase our listener base and listener hours
4. The operation in an emerging market and relatively new and evolving
business model
5. Ability to generate additional revenue on a cost-effective basis
6. Ability to continue operating under existing laws and licensing
regimes
11. Competitive Factors
● Spotify Radio is the biggest new feature in today's app release.
● Spotify offers 16x more songs to listeners at 15 million versus
Pandora at 1 million
● Spotify offers a bundled unlimited plan that allows you play
whatever song you desire.
● Spotify's goal is to become "ubiquitous" on all platforms, moving
quicker and quicker to shift its priorities towards mobile.
13. Competitive Factors
● Songza is based on the principle that using Pandora requires too much
thought.
● “Our whole premise is not that this is more gamified than Pandora, or
has more elite features,” Mr. Roman said. “It’s that this is simpler and
more directly related to the thing you want, which is music to make
whatever you’re doing better.”
● Songza carries no audio advertising because it makes money from
display ads and from partnerships with other media companies.
● When Songza introduced a new version of its mobile app this month, it
was downloaded 1.15 million times in 10 days shooting to the top of
Apple’s App Store rankings, passing Pandora.
14. Pandora's Business Model
and Problems
● The earnings report indicates that the vicious cycle
within Pandora's model is getting, well, more vicious.
● Unless Pandora can raise ad prices or increase the
number of ads it plays, it will remain in real trouble.
● Pandora has to pay royalties on every song it plays: the
costs rose to $101 million, while their revenues are
$80.7 million.
● Those royalty fees will increase in 2015, threatening
Pandora's long-term success.
15. Graph
. The graph shows that Pandora's revenues are falling behind its operating costs:
16. Pandora in trouble...
● Pandora is pushing users to write their Congressmen to support a
newly introduced bill called the Internet Radio Fairness Act.
● The issue is Pandora’s own weak business model.
● BTIG analyst Richard Greenfield, "the reason why companies such
as Pandora pay such high royalty rates as a percentage of
revenues is because they severely limit audio advertising to protect
the user experience and keep people on the platform. If Pandora
ran several minutes of audio ads per hour, the percentage of
revenues paid out as royalties would be dramatically lower. "
● Greenfield claims Pandora’s royalty rate should be increasing, not
decreasing, “which would force them to either increase the ad load
and survive at that ad load or find other ways of generating revenue
to sustain their service.”
17. The Future of Pandora
In the near future, Pandora is planning on:
● Broadening listener base
● Focusing on execution
● Getting on more devices
18. Broadening Listener Base
● Currently operating under licensing from the federal
government
● In 2014, negotiations will begin to determine the future
for after 2015
● Hopes to go international
● "Pandora's story in the US becomes so positive that it
becomes more and more ridiculous that we're not
licensed in other places"
19. Execution
● Only play music the listener wants to hear
● No changes to ruin the industry
● Expansion
20. Product Innovations
New Devices:
- Vehicles
■ Deal with companies such as Ford, Honda,
Acura
- Home Electronics
■ Televisions
■ Wifi Devices
New Content:
- Video
- Comedy
21. Questions
● How else do you see Pandora expanding?
● Do you think Apple's invention of their own music radio will
increase or decrease their revenue considering Pandora is
already so well known?
● Even though Pandora and many other emerging
technologies are so vulnerable to competition, why do you
think many people still choose to invest in them?
● Do you think Pandora would be as successful in other
countries as it is in the United States? Do you think it would
give them a competitive advantage?
● Would you pay to use Pandora?
