by Kyle Miller

2100 Franklin St
Suite 700
Oakland, CA 94612  Telephone #: (510) 451-4100

Overview of Pandora Radio

            Pandora Radio is an internet music streaming company that emerged online in 2005.  The company was founded by Tim Westergren, an award-winning music composer, and currently runs out of Oakland, CA.  Pandora offers a wide library of music to listeners and can help users discover new tracks and artists that are similar to the music they currently enjoy.  The streaming service is fueled by The Music Genome Project, which is an on going music analysis study that has created a formula using specific musical characteristics to help bring each user a unique playlist that caters to their music preference [2].  Pandora Radio is free to any person who enters their site, although there is an option for a paid subscription of $4.99 a month which deems a user a “Pandora One” member.  These members are able to stream music ad free and also get much higher sound quality when streaming [3].

“The Next Song” Pandora Youtube Video. (Courtesy of Youtube) [4]

Interface

             Operating Pandora Radio is a simple, yet exciting experience.  With over a million different songs, users are able to search their favorite artists and then get a playlist that will deliver similar music.  When a track appears, users are able read lyrics as the song plays and browse the “About” section to learn more background information on who created the music.  Users can create up to 100 different playlists and can also notify Pandora if they do not enjoy the music, so the site can start to find better songs to fit that user’s preferences. [2]

Key Executives

 

Finances

       Pandora’s third quarter results of 2015 reported a total revenue of $311.6 million.  This total was a 30% increase from the results of last year’s Q3 mark.  Advertising revenue also rose 31% to a total of $254.7 million [9].   Pandora executives relate this growth to the company’s recent $450 million dollar acquisition of Ticketfly, which makes Pandora a location to now discover and purchase tickets for upcoming live shows, attracting many new users who are avid concert goers [10].  Unfortunately, competition in the music streaming business has been a major concern for Pandora.  On October 23, Pandora had the company’s worst share drop off, falling 35 percent in one day primarily due to the rise of Apple Music and Spotify.  Apple Music recently reported it had 6.5 million paying subscribers, compared to only 3 million Pandora One subscribers who pay a monthly fee [11].

       Pandora currently sits at a $14 stock price, which seems negative for potential investors, but analysts do see potential with the company in the future.  The market currently predicts that Pandora’s premium is going to rise greatly over the next two January calls, signifying that their stock should move back up in the future.  Analysts also expect a major investor to acquire Pandora by 2017 due to the company’s growing diversification and increase in overall revenue [12].

 Interacting with Music Fans

           Pandora Radio has made great efforts this year to create a close relationship with their audience.  On September 9th, Pandora celebrated their 10 year anniversary by providing ad free streaming to anyone who visited their site.  This thanked fans for the support they had given to Pandora and also allowed people to see what being a paid subscriber entailed [14].  Pandora also stayed committed to their goal of bringing artists and fans closer together.  On November 11th, Pandora and country music star, Tim McGraw, joined together to create a listening party for McGraw’s new album, Damn Country Music.  The event took place in New York City and included a live performance from the country singer that was free of charge for fans [15].  To celebrate the holiday season, Pandora is hosting a concert event in New York City on December 10th.  The show, which will also be available to be streamed at home, will feature acclaimed artists Fall Out Boy, Panic At The Disco, and G-Eazy [17].

Competition

          Digital streaming is the most popular way people are accessing music today.  Although Pandora was created much earlier, streaming services such as Spotify, Apple Music, and Tidal have impacted the market greatly by forming on-demand listening.  In response, Pandora payed $75 million dollars to acquire assets from the music streaming service, Rdio, which recently fell into bankruptcy.  This will eventually make Pandora an on-demand streaming site, which will possibly attract people to leave other sites and use Pandora [18].  Pandora also recently took a major step ahead of competitors by having Adele’s critically acclaimed album, 25, on their site.  Since Pandora does not hold deals with major record labels and does not give their users access to chose the exact song they want, they are able to have the tracks available.  Apple Music, Spotify, and others are restricted from having the number one album, because Adele’s record label chose to forgo streaming sales and focus primarily on selling physical copies [19].

The Future of Pandora

       With the recent acquisition of Rdio, Pandora is preparing for a significant business change.  Unlike their competitor Spotify who offers free streaming, Pandora plans to ally with artists and labels and only offer paid on demand subscription.  This will put Pandora at a large disadvantage compared to Spotify, but the company believes that their main goal is to respect the art of music and the ones who spend handwork creating it [20].  Clear evidence that Pandora wants to honor artists is seen in their recent multi-year deal with Sony/ATV Music Publishing.  Pandora agreed to increase their royalty payments with the largest music publishing company, which will now open new opportunities for Pandora.  They now have the ability to expand to a international market with the music rights they have acquired, which could be a major business move since Pandora is currently only available in the United States, New Zealand, and Australia [21].

      Pandora also expanded their massive music library with many popular pre-1972 recordings of music.  The company reached a $90 million settlement to avoid any copyright allegations, setting the precedent to other streaming companies to respect the artists.  This addition of music attracts an older audience range to Pandora and will hopefully encourage record labels to be reasonable with establishing deals once Pandora begins their on demand service [22].

Sources

1. Pandora App Logo – press.pandora.com. Retrieved November 28 2015.

    2. About Pandora – Pandora. Retrieved November 28 2015.

    3. Pandora One – Pandora. Retrieved November 28 2015.

    4. The Next Song – YouTube. Retrieved November 28 2015.

    5. Pandora in Action – Pandora. Retrieved November 28 2015.

    6. Headshot of Tim Westergren – press.pandora.com. Retrieved November 28 2015.

    7. Headshot of  Steve Bene – press.pandora.com Retrieved November 28 2015.

    8. Headshot of Brian McAndrews – press.pandora.com Retrieved November 28 2015.

    9. Pandora Q3 2015 Financial Results – investor.pandora.com Retrieved November 28 2015.

   10. Roettgers, Janko (October 7, 2015) Pandora Buys Ticketfly to Sell Concert Tickets to Its Listeners – Variety – Retrieved November 28 2015.

    11. Sisario, Ben (October 23, 2015) Pandora Shares Plummet as Competition Grows – NY Times – Retrieved November 28 2015.

    12. Hagopian, Todd (October 28, 2015) After Pandora’s Steep Drop, An Acquisition Is Almost Inevitable – Seeking Alpha – Retrieved November 28 2015.

    13. Pandora’s Share Price Chart – Bloomberg.com – Retrieved November 28 2015.

    14. Olanoff, Drew (September 1, 2015) Pandora To Celebrate 10th Anniversary With Day of Ad-Free Listening – TechCrunch – Retrieved November 28 2015.

    15. Stutz, Colin (October 27, 2015) Tim McGraw to Celebrate ‘Damn Country Music’ Release With Pandora Mixtape, Party – Billboard – Retrieved November 28 2015.

    16. Tim McGraw Performing – Billboard – Retrieved November 28 2015.

     17. (November 10, 2015) Pandora Holiday: Exclusive NYC Concert and Livestream Featuring Fall Out Boy, Panic! At The Disco, G-Eazy and DJ Sets by Cash Cash – Business Wire – Retrieved November 28 2015.

     18. Owsinski, Bobby (November 18, 2015) – The Pros and Cons of Pandora’s Rdio Acquisition – Forbes – Retrieved November 28 2015.

      19. Kastrenakes, Jacob (November 25, 2015) – Pandora is Streaming Adele’s ’25’ and Her Label Can’t Stop It – The Verge – Retrieved November 28 2015.

      20. Popper, Ben (December 1, 2015) – Pandora Cozies up to the Music Labels as it Prepares to Take on Spotify – The Verge – Retrieved December 1 2015.

      21. Peoples, Glenn (November 13, 2015) – The Pandora-Sony/ATV Deal – Billboard – Retrieved November 29 2015.

     22. Gardner, Eriq (October 22, 2015) – Pandora Reaches $90 Million Settlement With Labels Over Pre-1972 Music – Billboard – Retrieved November 29 2015.

    23. Pandora Logo – Fortune.com – Retrieved November 29 2015.