| Type | Public | ||
|---|---|---|---|
| Traded as | NYSE: P | ||
| Founded | Oakland, CA (2000) | ||
| Founder(s) |
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| Headquarters | Oakland, CA | ||
| Area served | United States | ||
| Key people |
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| Parent | The Music Genome Project | ||
| Website | pandora.com | ||
| Alexa rank | 347 (December 2011[update])[1] | ||
| Advertising | Banner ads | ||
| Registration | Optional | ||
| Users | 100 million (July 2011)[2] | ||
| Available in | English | ||
| Launched | January 2000 | ||
| Current status | Active | ||
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Pandora Radio is an automated music recommendation service and custodian of the Music Genome Project available only in the United States. The service plays musical selections similar to song suggestions entered by a user. The user provides positive or negative feedback for songs chosen by the service, which are taken into account for future selections.
While listening, users are offered the ability to buy the songs or albums at various online retailers. Over 400 different musical attributes are considered when selecting the next song. These 400 attributes are combined into larger groups called focus traits. There are 2,000 focus traits. Examples of these are rhythm syncopation, key tonality, vocal harmonies, and displayed instrumental proficiency.
The Pandora media player is based on OpenLaszlo. Pandora can also be accessed through many stand-alone players, such as the Roku DVP (formerly Netflix player) Reciva-based radios (from companies like Grace Digital, Sanyo, and Sangean), Frontier Silicon-based connected audio systems, Slim Devices, and Sonos[3] product(s). On July 11, 2008, Pandora launched a mobile version of their software for the Apple iPhone, iPad, and iPod Touch through the iTunes App Store. Pandora is also available for Android phones[4], BlackBerry platforms, HP webOS (used on the Palm Pre, Palm Pixi, Palm Pre 2, and HP Veer), and Windows Mobile devices. Pandora was the provider for MSN Radio until MSN discontinued their internet radio service on June 18, 2008.[5] A modified version of Pandora has been made available for Sprint Nextel.
The service has two subscription plans: a free subscription supported by advertisements, and a fee-based subscription without ads. There are also advertisements in Pandora Mobile for mobile phones and the Pandora in The Home computer appliance. Most users choose the free subscription.[6]
As of IPO, Pandora had 80,000 artists, 800,000 tracks in its library and 80 million users.[7]
In May 2010, Pandora was named in Lead411's 2010 Hottest San Francisco Companies list.[8] In January 2011, Pandora met with bankers to consider a possible $100 million IPO.[9][10] The company filed with the SEC for a $100mm IPO on February 11, 2011[11] and officially began trading on the New York Stock Exchange with ticker symbol "P" on June 15, 2011 at a price of $16/share. This gave them a valuation of nearly $2.6 billion.[12]
During its 2011 fiscal year, Pandora reported $138 million in revenue with a $1.8 million net loss, excluding the cost of a special dividend associated with the IPO. [13]
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A station is set by specifying an artist or song, or a combination of multiple items of any kind in a single station. Listeners can tune into pre-made genre stations and other users' stations. Each track played can be responded to with favorable (thumbs up) or unfavorable (thumbs down) buttons, which determine if it should be played, and how much should similarly classified songs be played in the station. A second negative response to the same artist will ban that artist from the selected station unless the user has marked the artist positively on another occasion. No response is applicable to musical attributes or to albums. An unfavorable response immediately stops play of the track.
In addition, a menu is provided with the choices: I'm tired of this song, Why was this song selected?, Move song to another station, New Station, and Bookmark. A Buy button is located at the top of each song block. From there, listeners can click on links to buy the song from iTunes or Amazon.
There is a setting in each member's account regarding whether the user wants songs with explicit lyrics played. This, however, does not apply exclusively to albums with the parental advisory label, as other songs with censored versions will have that version played. An example is "Jet Airliner" by the Steve Miller Band, which had one word censored for radio play. With explicit lyrics off, that version will play, despite the album itself not having a PA label.
To comply with the requirements and protections offered by the DMCA, Pandora only serves users in the United States. Initially this was enforced lightly, by requiring a U.S. ZIP code at registration, but since May 3, 2007, Pandora has blocked non-U.S. IP addresses.[14]
Rewind or repeat is not possible. Until May 2009, six skips per station were allowed per hour, further limited to 72 skips every 24 hours; giving a "thumbs down" response, or a "don't play for a month" response, count as "skips". On May 21, 2009, the skip limit was altered such that it counts total skips from all stations with the limitation of twelve total skips every 24 hours (an average of one skip every two hours). If a listener gives a song a thumbs-down or "don't play for a month" after the limit has been exceeded, the song will continue to play; it's only after the song has completed that it becomes subject to the listener's restrictions. This limit was not applied to the Vista gadget. Originally, this was determined per account, but has since been determined per IP address. For the Vista gadget, skips can be reset by closing the gadget and adding it again. However, doing this too frequently will result in an error that will prevent usage of both the Vista gadget and the internet player for up to thirty minutes.
Play of a single artist is limited. Pandora provides similar music, not a play-on-demand service.
As of 2009, the mini player is only available with Pandora's subscription service. Free accounts include advertising. These include simple interruptions, with the ad listed on the stream; advertising skins, which do not interrupt the stream; and popup ads. The Vista player has no ads.
Initially, users with free accounts could listen to 40 hours of music a month, and could pay $.99 per month for unlimited streaming. In September 2011, Pandora removed the 40 hour listening limit[15].
The Pandora Mobile for BlackBerry application is limited to AT&T, Sprint, Verizon, T-Mobile, Boost Mobile, and U.S. Cellular U.S. carriers, but visiting the Pandora website directly from other providers' BlackBerry users have been successful downloading the fully operational application.
The Windows Mobile client is limited to a select number of handsets, however the installer is available from 3rd party sources and works fine or with only minor display glitches on most devices.[16]
Pandora is available on the iPhone, but authorized downloads and installs are only possible with a US iTunes account.[17]
Pandora’s decision to be a consumer-oriented music discovery service, specifically a non-interactive radio station, has had significant implications with respect to its business model.
In the three months that ended October 31, 2011, advertising comprised 88% of Pandora’s total revenues.[20] RPM or revenue per 1000s of hours is determined based on CPMs or cost per thousand impressions. CPMs are largely dependent upon network effects and thus increase as a website scales and adds users. As such, Pandora’s strategy in order to allow for widespread distribution was to offer a service unbundled from devices and transport. Pandora is currently working with system-on-chip manufacturers to embed its technologies on the chips they sell to consumer electronics manufacturers like Samsung, Sony, and Panasonic.[21]
Pandora’s cost structure is highly variable, with content acquisition costs representing roughly 50% of total costs.[22] There are three main costs associated with content acquisition. First, SoundExchange collects content fees on behalf of labels or artists on the recording themselves. These are by far the largest content acquisition costs. Second, Pandora pays licensing fees to agencies such as BMI, ASCAP, or SESAC in order to compensate composers, songwriters and publishers. Lastly, Pandora also pays Rovi for song and artist information; this has recently been structured as a flat monthly fee.
High variable costs mean that Pandora does not have significant operating leverage, and in the next couple years might actually have negative operating leverage due to an unfavorable shift in product mix towards mobile. Pandora is currently estimated to monetize mobile hours at roughly one-ninth the rate of desktop hours.[23] Since Pandora pays the same licensing cost per hour irrespective of the user's platform, the net contribution to earnings per mobile hour is even more skewed with respect to contribution to earnings from desktop hours. Mobile revenues will improve over time as Pandora shifts from relying on third-party ad networks to selling ad inventory internally at premium rates.
In 2007, a federal panel agreed with a SoundExchange request and ordered a doubling of the per-song performance royalty that Web radio stations pay to performers and record companies. Under this scheme, internet radio would pay double the royalty as satellite radio.
Because of recent Copyright Royalty Board rulings that increase fees and ask for licensing guarantees, the Pandora service is no longer available in countries other than the United States.[24][25] These rulings affect all U.S.-based Internet-based radio stations (terrestrial radio is not affected).
As of July 2008, Pandora is in talks with major music labels regarding royalty issues to allow a return to the European market. Costs remain a concern because of European royalty standards and a low demand for paid music services.[26]
In 2008, the founder of Pandora stated that the company may be on the verge of collapse. Royalty fees account for a majority portion of Pandora's revenues. If an agreement between Pandora and SoundExchange is not reached, it could mean the end of Pandora. "We're losing money as it is," said Tim Westergren. "The moment we think this problem in Washington is not going to get solved, we have to pull the plug because all we're doing is wasting money." [27]
On September 30, 2008, a bill was passed by the U.S. House and Senate to allow sites like Pandora to continue negotiations with SoundExchange into 2009.
On July 7, 2009, Pandora announced that an agreement had been reached regarding the royalty issue, which would significantly reduce the royalty rate, making it possible for Pandora to stay in business. Also announced was that free listening would be limited to 40 hours per month, but can be extended to unlimited for that month for USD$0.99. "The revised royalties are quite high," the company's blog notes, "higher in fact than any other form of radio".[28] The extended listening fee differs from "upgrading", which also disables advertisements, increases the bitrate to 192 kbps, and provides a dedicated music player (as opposed to listening through browser). This service, known as "Pandora One", costs $36 and is billed annually.[29]
On September 20, 2011, Pandora announced they have removed the 40 hours listening cap[15] and extended it to 320 hours. If you then reach the 320 hour listening cap, Pandora will then contact you, via email, about whether you’re abusing the system.[30]
On November 22, 2011, Pandora reported its Q3 earnings. Royalty costs accounted for 50% of revenue, slightly better than expected. Its revenue, most of it from advertising, continues to rise at respectable rates. Not only has Pandora attracted more users but the average number of hours per user have also increased. Pandora now accounts for an estimated 4% of total US listening hours. As Pandora grows, it hopes to gain leverage on music labels and drive royalty costs down. [31]
On December 9th, 2011, the CEO of Spotify, Daniel Ek, announced Spotify "radio" which boasts "unlimited stations" and "unlimited skips." This adds yet another competitor to the already packed internet radio market. Though Pandora's usage is 70% mobile, the creation of the Spotify "radio" app could intend to compete against Pandora's mobile market. [32]