Pandora | Principles & Practices

By Jamie Neukrug

The Pandora Media Inc. Logo [1]

Pandora Media Inc.

2101 Webster Street
16th Floor
Oakland, CA 94612
Phone Number: (510) 451 4100
URL: http://www.pandora.com
Twitter Handle: pandora_radio

Key Executives

la-et-ct-pandora-brian-mcandrews-ceo-20130911-001 [2] Brian McAndrews–CEO, President, & Chairman

tim-westergren [3]Tim Westergren–Chief Strategy Officer,Founder

PANDORA RADIO/BUSINESS [4] Tom Conrad–Chief Technology Officer

Unknown [5] Mike Herring–Chief Financial Officer

Pandora Radio [6]

A Brief History

In January 2000, Tim Westergren founded a company called Savage Beast Technologies, based on his idea to develop a music genome. This technology was used to develop playlists based on individual consumer preferences. Westergren originally marketed these music recommendation service businesses without much success. In 2004, he shifted his target audiences from businesses to individual users and changed the name to Pandora. Listenership increased sharply. A 2007 ruling on increased royalty prices threatened to ruin Pandora, but the issue was resolved in 2009. The introduction of the iPhone app that allowed people to stream music was a game changer. [7]

Financial Information

Pandora earns the majority of its revenue (87%, 87%, and 88% in the last three years) through computer and mobile based advertising sales. The company offers a free subscription plan which generates revenue through these advertisements, as well as Pandora One, which offers a commercial free option to subscribers for a fee. The ability to reach audiences through mobile and other “on-the-go” devices has increased profits significantly. Total revenue has grown from $137.8 million in 2011 to $427.1 million in 2013. Pandora Media Inc.’s common stock on the NASDAQ market, NYSE, is currently valued at $28.45, a 1.01% decrease from its previous close, as it continues to fluctuate. Based on the latest report, Pandora has over 70% share of internet radio within the top 20 stations in the United States. [8]

The Numbers [8]

Year	Total Revenue (in millions):	Listener Hours (in billions):	Active Users (in millions):
2011	$137,800	3.83	29.3
2012	$274,340	8.23	47.6
2013	$427,145	14.01	65.6

About Pandora

Pandora’s Business Model [9]

By allowing its subscribers to dictate the type of songs and comedy they want to hear, Pandora has become internet radio’s market leader in the United States. Listener playlists are developed based on their feedback from a library of songs that have been categorized based on hundreds of musical qualities. Since its inception, Pandora has grown to have 200,000,000 registered users, over 1,000,000 songs in its collection, over 4 billion stations created, and has expanded internationally to Australia and New Zealand. Listeners can mix up to 100 stations, customizing them to their liking. They can also create profiles and connect with others based on mutual preferences. In addition to computers, Pandora has expanded to mobile “apps” on smartphones such as Blackberry, Android, the iPhone, and other interactive devices including the Android tablets, iPad, and Amazon Kindle Fire, and the Nook. Pandora made deals with car companies, including BMW and Buick, and can now be accessed in vehicles. [10] [11]

chart-of-the-day-internet-only-audio-providers-june-2010

Pandora Media vs. Other Internet Audio Providers [12]

The Music Genome Project sets Pandora apart from competition. [13]

The Music Genome Project®

Pandora’s executive team recognizes the need to accommodate the individual musical tastes of subscribers. The Music Genome Project® is the most intricate system ever created to choose music based on its characteristics. Trained musicologists thoroughly analyze songs based on attributes such as voice, tone, genre, and rhythm. The library includes everything from the week’s Top 40 to classic hits from past decades. The project is often compared to human DNA because every detail is diverse. Musicologists utilize the data stored in the Music Genome Project® to create a satisfying, unique listening experience for all. [14]

Celine Dion performed in NYC in October. [15]

Pandora Presents

“Pandora Presents” is Pandora’s series of live concerts that allow listeners to connect with their favorite artists. Originating in 2012, these performances continue to be a successful display of user appreciation and set Pandora apart from competition. Pandora employees personalize it further by using listenership they have identified for specific artists to invite certain users to attend the show. [16]

During a recent October concert in Los Angeles, recording artist, Bridgit Mendler, mentioned Pandora’s role in helping to develop her fan base. [17] Celine Dion performed in New York City on October 29, 2013, promoting her new album “Loved Me Back to Life.” Past entertainers include Dr. Dog, Walk the Moon, Theophilus London, and other emerging artists.

[18]

Recent News

Pandora Media vs. iTunes Radio

Pandora vs. iTunes Radio [19]

With Apple Inc.’s recent release of its new service, iTunes radio, Pandora’s competition continues to grow. Like Pandora, it creates playlists based on the music the listeners’ choose. It also features the same service options, one with advertisements and commercial free iTunes Match. iTunes Radio allows users to view their entire history and categorize songs by “Hits,” “Variety,” and “Discovery.” [19] Both services allow users to post to Twitter or Facebook, but while Pandora posts both song and station, iTunes only provides the latter. Apple hopes their loyal 575 million iTunes users will convert to iTunes Radio.

Despite the fact that this new application is just as technologically advanced, Mike Herring, Pandora’s Chief Financial Officer, stated that listening hours grew 9% since last month. Pandora’s market share rose to 8.06% in October 2013 from 7.77% in September, when iTunes Radio was first released. [20]

Other Competition: Pandora Media Inc. also competes with broadcast radio providers including Clear Channel, CBS and Sirius XM, a satellite radio provider. Additional rivals include online radio providers such as CBS’s Last.fm, Slacker Personal Radio, and Clear Channel’s iheartradio and interactive media stations RDIO, Apple’s iTunes Music Store, Spotify, Rhapsody, and Amazon. [8]

Pandora Mobile [22]

Pandora Removes 40-Hour-Per-Month Limit: Pandora has removed its 40-hour-per-month limit on free mobile listening, allowing people unlimited time to use the service. Pandora was able to make this change due to its success in mobile revenue advertising, trailing only Google and Facebook. The limit was placed in March 2013 to control royalty costs, but management eliminated it to stay on top of their competition. [21]

iPad Redesign: On September 18, 2013, Pandora released the Pandora 5.0 for the iPad. This was the greatest redesign of the app since its launch in April 2010. The iPad’s large screen and touch capability allows users to easily navigate and search their favorite music. This update was made for Android tablets as well. Pandora 5.0 features more intricate music discovery and exploration, a personal music profile and newsfeed, and the ability to connect and share music with friends. [23] [24]

Pandora 5.0 on Android Tablets [24]

Pandora on Google Chromecast: Pandora is also now available on Google Chromecast, a TV-connected device that delivers audio and video signals wirelessly to any screen in your home. Chromecast consumers can now use Pandora with the click of their smartphone or tablet. Once the music is sent to the television, the device is no longer needed for the music to continue. The Play, Pause, Thumb, and Skip buttons are still managed through the mobile device used. Listeners can customize the music they choose with Google Play or the App Store. [25] [26]

Sources:

[1] Dayandadream.com: Pandora Media Inc. Logo

[2] LA Times: Brian McAndrews Image

[3] Business Innovation Factory: Tim Westergren Image

[4] Mercury News: Tom Conrad Image

[5] Apple Insider: Mike Herring Image

[6] Pandoraradioformac.org Internet Radio Image Source

[7] NY Times Article History of Pandora

[8] Pandora’s Financial Information (Annual Report/Form 10-K)

[9] Bizibly.wordpress.com: Pandora Business Model Image Source

[10] Pandora.com: About Pandora Media Inc.

[11] Pandora.com/mobile: Pandora Going Mobile