Launched by Will Glaser and Tim Westergren in 2005
It’s the most successful subscription radio service.
In January 2011 it had over 80 million registered users in
USA and increasing by one new subscriber about every
It had over 50% of all internet radio listening hours.
Creates customized channels or playlists based on the
users preferences such as his favored artist or genera.
Professionals musicians listen to new songs every day
and classify them into categories based on several
criteria , there categories will be used to generate those
Pandora.com founders had to deal with the fact that
other internet radio stations were providing free music
but without ads, moreover iTunes launched in 2001and
by 2005 it had become very popular and was charging
99 cent a song with 20 m users .. So the odds were
It’s first business model was to give away 10 hours of free access to
Pandora , and then ask subscribers to pay 36$ a month for a year after
they used up there free 10 hours.
1000.000 people listened to their 10 hours for free, but they refused to
pay for their annual service… people loved Pandora but were
unwilling to pay for it, or so it seemed in the early years.
Then it facing financial collapsed .. Pandora introduced ad-supporter
option, subscribers could listen to a maximum 40 hours per month for
free.. After that subscribers had choices : subscribe for the rest of the
month for 99 cent or become a premium member
and if not , the music would stop but he can sign up again next time
This model turned out to be a success and in a few weeks they had sufficient
funds to pay their infrastructure
In 2006 Pandora added a “ buy “ button that direct listeners to amazon or iTunes
to buy songs they listening to.
In 2008 they added iPhone app which attracted 35.000 everyday.
In 2010 they had 600.000 premium users which is .01 of the total 60 million users.
In 2011 the value of its shares was $2.6 billion.
Revenues mostly from ads , subscriptions and affiliate fee from Amazon and
Free & premium
The model is based on giving away some services for
free to 99% of the customers , and relying on the other
1% of the customers to pay for premium versions of the
The marginal cost is closed to zero, and that’s why the
freemium model is feasible.