by Ally Thibault
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Music has always been a uniting force across the entirety of the human race. It brings people together, projects ideas and opinions across generations, and encapsulates emotions that simply cannot be preserved otherwise. It is a timeless source of comfort and entertainment. While traditional radio has always been a reliable outlet to access music, citizens of the digital age tend to crave more than just what is given to them. People want to hear the music they like. Seeing this trend in listener niche preferences, Pandora Radio founder Tim Westergren channeled his passion and knowledge of music and created one of the most successful personalized online radio platforms to date.
Pandora Radio is an online radio station and application that allows users to search songs, artists, and albums and creates customized stations featuring music similar to the choice of the user. The creative and analytical muscle behind Pandora comes from the Music Genome Project [3], which is known as “the most comprehensive analysis of music ever undertaken”. The project has collected hundreds of details about virtually every song ever recorded, which allows Pandora to sort songs into all kinds of diverse categories. The main purpose of Pandora is not only to provide a steady stream of music to listeners, but also to introduce them to new and current music akin to their already established tastes. Their overall aims are summed up most succinctly in their mission statement: “To play only music you’ll love”. [1]
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Pandora Media, Inc. was originally founded in January 2000 in Oakland, California, where it is now headquartered. Founder Tim Westergren developed the Music Genome Project with the intention of creating playlists tailored to the interests of music listeners. He initially considered licensing the music recommendation service to other major companies, but this proved to flop in terms of generated profit, receiving only a $20,000 fee from Barnes & Noble.com for further development. After pitching the idea to countless venture capitalists, he finally settled on the idea of an internet radio website powered by the genome. In the early years following its launch in 2005, Pandora encountered multiple close brushes with bankruptcy as the company experimented with different business models and faced steep increases in music royalty fees. It started quite modestly, used initially by friends and family of Westergren and his colleagues. Since then Pandora has caught fire — in January of 2012, Pandora surpassed the milestone of 125 million registered users. [2]
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Now commandeered by CEO Brian McAndrews, Pandora’s business model has improved in sustainability: centered around generating revenue primarily through online advertisements and, on a lesser scale, subscription fees, and paying royalties to the artists whose music it features. Their third quarter earnings results yielded an increase of $0.07 per share with an overall quarterly revenue of $180 million (positive surprise of +1.02%), with analysts predicting a continued increase on both fronts into the fourth quarter. [4] Over the course of the months following March of 2014, Pandora’s market share increased from 9.11% to 9.13%. In addition, their listener hours have grown 28% year over year in May 2014. Overall, Pandora’s profitability has improved despite royalty price hikes as they have fine-tuned their ad-targeting strategies. [5]
As the online radio industry has seen a surge in popularity over the past couple of years, many competing companies like Spotify have entered the market space to take a gander at the boundless range of music-loving consumers. As a result, Pandora has been pressed into making creative changes and additions to their market appeal strategy in order to distinguish themselves from their competition. The ability to provide their customers with something different and enticing is crucial in maintaining their relevance in the internet radio sphere. With this is mind, Pandora initiated a series of live concerts available for free exclusively for their listeners this past September. They partnered with Lexus to sponsor the pop-up concerts, which took place in Southern California. The performing artists included popular, current acts like MAGIC!, Kongos, and Nico & Vinz. The strategy of distributing the invitations to the concerts was intended to reward Pandora listeners for their loyalty. Pandora determined which users had created unique stations specifically for the artists who would be performing and extended invitations to those who showed a particularly strong interest in the musicians. This allowed Pandora listeners to truly connect with the artists they love, based on how they interacted with them through the online radio platform. Tommy Page, Head of Music Partnerships at Pandora, explained that the concert series demonstrated their “ability to leverage [their] data to create personalized experiences with the fans, as well as…the inroads [they’ve] made with the music industry”. This live concert experience option was unique to Pandora listeners and part of the initiative to differentiate them from their competitors. [6]
Pandora’s “thumbs up” button also brought artists to life for listeners in other ways. On September 5th, a few lucky listeners who clicked the button during a song by classically trained violinist Lindsey Stirling were suddenly prompted by an invitation to video chat with the artist herself. If they accepted, they were treated to a private conversation and performance from Ms. Stirling from her studio in LA. Since then, Pandora’s #ThumbMoments campaign has brought musicians to life for many of their listeners. These “thumb gifts” will continue to reward listeners for choosing Pandora by granting them access to totally unique experiences that can’t be found anywhere else. Pandora’s Chief Marketing Officer Simon Fleming-Wood explained that the experience aims to hyperbolize that feeling you get when the “perfect song” comes on your Pandora station, and the result is truly emotional. [7]
This fall, Pandora has made great strides in branching out to bring artists closer to listeners. They have begun to focus more of their marketing muscle towards interactive experiences with the music they feature in an attempt to set themselves apart from their competition. Pandora continues to evolve as the industry changes and is certainly a company to keep an eye on in the months to come.
Sources
[1] About Pandora Media. (n.d.). Retrieved November 29, 2014, from http://www.pandora.com/about