by RICO PEDRAZA
2101 Webster Street
Oakland, CA 94612
Pandora is currently the largest online music streaming and internet radio company in the world with over 81.5 million users as of December 31st, 2014(3). The company is an online music streaming service that provides its users with automated music recommendations based upon a song, artist, album, or genre being searched. This automation is powered by Pandora’s service – the Music Genome Project – which gives human curated music recommendations for each individual. The company currently operates under two payment tiers. A free tier allowing unlimited internet radio music streaming with restrictions on the number of song skips allowed per day, audio quality, and is fueled by advertisements between songs. Alternatively the paid tier “Pandora One” ($4.99 per month or $54.89 per year) (4) offers ad-free listening, higher audio quality on desktop listening, and a higher number of daily song skips allowed.
Brief Company History
Founded by Tim Westergren in 2000 the company has grown to an immaculate 81.5 million user base(3), trumping all other streaming services with Spotify being the closest with 60 million users(8). Based out of Oakland, California, Pandora has had a quick rise in its 15 years earning $920.8 million in total revenue in 2014(9). Over the years Pandora has changed multiple business models, due to new unexpected variable costs in today’s online music streaming industry. These obstacles included the changing climate around artist payouts per stream in the music industry, increased licensing costs through SoundExchange(10) etc. etc. Pandora has been able to take these hurdles in stride, shifting its focus into brand and fan interaction as well as entering the live entertainment space over the past few years.
The screenshot below shows the typical Pandora user interface with basic music controlling functions present.
Devices / Platforms
Today Pandora is available across virtually all platforms; including car radio systems, almost all mobile devices, online computer streaming, and available on some smart televisions. Additionally Apple recently announced that Pandora will officially be one of the first apps available on the fist operating system of their new product, the Apple Watch(11). The Apple Watch is Apple’s newest device that incorporates a “smart watch” device with the interface of an iPhone. It is set to be released on April 24th, 2015.
On December 31st, 2014 Pandora released their end of the year Financial reports. The report showed a trend that Pandora’s year-over-year mobile and local advertising revenue both grew from 2013. Local advertising revenue was $152.9 million (155% increase from 2013), and mobile revenue alone accounted for $712 million (a large portion of Pandora’s total $920.8 million 2013 total revenue) which also was a 58% increase from 2013(9).
Pandora accredits this success to the fact that 2014 was the highest year of mobile monetization in company history. Pandora’s 2015 Q1 financial report will be reported publicly on April 24th, 2015.
Today Pandora’s primary competitors include Spotify, iHeart Media, iTunes Radio, and Sirius XM to name a few. Although each of these services differ slightly, Pandora is still the leader in total users of all of these streaming services(3).
Additionally, two new companies have been in the music streaming service news recently. The first being Jay-Z’s newly launched music streaming service Tidal, and the second being Apple’s currently unnamed and soon to launch streaming service. Tidal launched March 30th, 2015(12) following a $56 million acquisition by artist Jay-Z of the parent-company Aspiro(13). Tidal is unique because unlike Pandora and Spotify, Tidal has two paid monthly subscription tiers with no option of free listening for the user. With only 500,000 users at launch it is unclear if Tidal will be a future competitor.In August of 2015, Apple acquired Beats Music for $404 million dollars(17). Currently there has been much speculation as to what Apple is planning to do with their service and when it will launch, however there are a few factors to keep in mind:
- First the acquisition of Beats Music has brought Apple music taste makers like Jimmi Iovine (former CEO of Interscope Records), Andre “Dr. Dre” Young (founder of Beats Music), and Zane Lowe of BBC Radio 1. Potential for more human music curation.
- Secondly, Apple as of 2013 had a user base of 500 million paid users(18), which since has no doubt increased, allowing them to potentially launch a music streaming service with an unprecedented initial user base.
Pandora is in the fortunate position where it is a pioneer of music streaming, in a market becoming oversaturated with competitors. Pandora sets itself aside by possessing the most users of any of these services, 81.5 million users, and by having a unique streaming service / business model. With all this said, Pandora recently has begun entering the live entertainment, fan interaction, and brand sponsorships parts of the music industry.
For the 4th year in a row, Pandora has sponsored an event held an event at Austin, TX during the South by Southwest Music Festival.
Called “The Pandora Discovery Den”, Pandora selected over 35 current notable musicians from the genres of electronic, hip-hop / R&B, and rock. Held over 4 days, Pandora was able to showcase many up and coming artists that are featured and heavily streamed on Pandora. Each day is a new genre, and all performances were broadcasted live on Pandora’s web & mobile outlets. This event allowed fan interaction for those attending South by Southwest as well as fan interaction for those who couldn’t attend the fest but lived vicariously through the live broadcast.
Additionally, Pandora continued this fan interaction on January 30th, 2015 Pandora continued its fan interaction by presenting a live stream of Jack White’s sold-out performance at Madison Square Garden. In anticipation of the live stream Pandora, in conjunction with Jack White’s record label Third Man Records, curated a Jack White digital mixtape that was exclusively available to Pandora users. The live stream was made available for 72 hours after The Madison Square Garden show, again allowing Pandora fans to vicariously experience the concert(20). The below clip(21) shows Jordan Klepper interviewing Jack White speaking about his upcoming MSG show; an example of additional content created by Pandora that was used exclusively during this campaign.
Finally Pandora in early April, in a joint venture with AEG Live’s Concerts West, announced an official tour pre-sale for the Rolling Stone’s upcoming ZIP CODE tour exclusively through Pandora. Pandora users were given access to pre-sale tickets 4 days before the general sale began on April 13th, 2015(22). And Pandora again created a digital mixtape of songs hand selected by members of the Rolling Stones themselves. This campaign was beneficial to both parties, and offered Pandora increased outreach with their fans, establish a relationship with major concert promoter AEG Live, as well as continued their pursuit of the live entertainment market.
All three of these events show the future direction Pandora as a company is currently moving towards. Pandora will continue the success of their already well established streaming service, while developing the company to include new outlets within their business model.
(1) – Pandora Logo – press.pandora.com – RT: 4/17/2015
(2) – Pandora App Logo – press.pandora.com – RT: 4/17/2015
(3) – Pandora User Number – statista.com – RT: 4/17/2015
(4)- Pandora One pricing – pandora.com/one – RT: 4/17/2015
(5) – Brian McAndrews Headshot – rightstartups.com – RT: 4/17/2015
(6) – Tim Westergren Headshot – chicagoideas.com – RT: 4/17/2015
(7) – Sara Clemens Headshot – thedeal.com – RT: 4/17/2015
(8) – Spotify User Number – press.spotify.com – RT: 4/17/2015
(9) – Pandora End of the Year Financial Report 2014 – press.pandora.com – RT: 4/17/2015
(10) – SoundExchange Fees – gigaom.com – RT: 4/17/2015
(11) – Billboard Apple Watch – billboard.com – RT: 4/17/2015
(12) – Tidal Launch – billboard.com – RT: 4/17/2015
(13) – Aspiro Yahoo Finance – yahoo.com/finance – RT: 4/17/2015
(14) – Pandora Screenshot – pandora.com – RT: 4/17/2015
(15) – Billboard Apple Watch Photo – billboard.com – RT: 4/17/2015
(16) – Tidal Signing Photo – nypost.com – RT: 4/17/2015
(17) – Apple Acquisition of Beats – forbes.com – RT: 4/17/2015
(18) – Apple 500 Million Users – appleinsider.com – RT: 4/17/2015
(19) – Pandora SXSW Poster – music.mxdwn.com – RT: 4/17/2015
(20) – Jack White Pandora Press MSG – press.pandora.com – RT: 4/17/2015
(21) – Jack White Pandora MSG 72 Hour Stream – youtube.com – RT: 4/17/2015
(21) – Pandora / AEG Exclusive Presale – press.pandora.com – RT: 4/17/2015