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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 />
Objective<br />Goal<br />Position Pandora to create new revenue streams and refine existing ones, for long-term sustained ...
Introduction<br />Situation<br />Purple &GOLD<br />C  O  N  S  U  L  T  I  N  G<br />
Problem<br />Purple &GOLD<br />C  O  N  S  U  L  T  I  N  G<br />Situation<br />Analysis<br />Action<br />Strategy<br />Co...
Industry Potential<br />300K Subscribers<br />48M Users<br />Purple &GOLD<br />C  O  N  S  U  L  T  I  N  G<br />Increasin...
Broad Competitive Landscape<br />Purple &GOLD<br />C  O  N  S  U  L  T  I  N  G<br />Situation<br />Analysis<br />Action<b...
Competitive Options<br />Purple &GOLD<br />C  O  N  S  U  L  T  I  N  G<br />Proven that consumers prefer Music Genome Pro...
Pandora’s Current Business Model<br />240.4 Million People Ages 14+*<br />29% Stream Online Audiot<br />20% of radio users...
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 St...
Situation<br />Analysis<br />Purple &GOLD<br />C  O  N  S  U  L  T  I  N  G<br />
Strategy Options<br />Purple &GOLD<br />C  O  N  S  U  L  T  I  N  G<br />Situation<br />Analysis<br />Action<br />Strateg...
Utilizing the Framework<br />Evaluating Key Factors:<br /><ul><li>Investment Costs
Revenue Generation
Increase in Brand Value
Legal Barriers
Feasability</li></ul>Purple &GOLD<br />Possible Strategies:<br /><ul><li>Pandora ‘Open Mic’
Pandora Video
Pandora International
Refine Current Offerings</li></ul>C  O  N  S  U  L  T  I  N  G<br />Situation<br />Analysis<br />Action<br />Strategy<br /...
Framework Analysis<br />Purple &GOLD<br />C  O  N  S  U  L  T  I  N  G<br />Situation<br />Analysis<br />Action<br />Strat...
GE Analysis<br />Open Mic<br />Pandora Intl<br />Pandora Video<br />Refinement<br />High<br />Payoff<br />Purple &GOLD<br ...
Analysis<br />Strategy<br />Purple &GOLD<br />C  O  N  S  U  L  T  I  N  G<br />
Overall Strategy<br />Pandora needs Long-Term Sustainable Growth Model  Ad revenue and hopeful subscriptions not enough<b...
Refinement<br />Lower Time Limit<br />20-40 hours a month <br />11.9% of users<br />21% of hours<br />No direct revenue fr...
Refinement<br />Watch Advertisement / Payment<br />Continuance fees:<br />Watch extended ad<br />Pay continuance fee<br />...
Open Mic<br /><ul><li>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</li></ul>Purple &GOLD<br />C  O  N  S  U  L  T  I  N  G<br />Situation<br />An...
Open Mic<br /><ul><li>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
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Ey Case Compeition Pandora

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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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