Pandora homepage as of September 2011
|Traded as||NYSE: P|
|Foundation date||Oakland, CA (2000 )|
|No. of locations||Houston, TX; New York City|
|Area served||United States, Australia, New Zealand|
|Key people||Brian McAndrews, Chairman/CEO|
|Revenue||US$274,000,000 (FY 2012)|
|Net income||US$ -16,000,000 (FY 2012)|
|Parent||Pandora Media, Inc.|
|Alexa rank||225 (March 2014[update])|
|Advertising||Banner ads, Video ads, Audio ads|
|Registration||Optional (required to save stations)|
|Users||54.9 million (July 2012)|
Pandora Internet Radio (also known as Pandora Radio or simply Pandora) is a music streaming and automated music recommendation service that serves as "custodian" of the Music Genome Project. The service, operated by Pandora Media, Inc., is only available in the United States, Australia and New Zealand. The service plays musical selections of a certain genre based on the user's artist selection. The user then provides positive or negative feedback for songs chosen by the service, which are taken into account when Pandora selects future songs.
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 media streaming devices, such as the Roku, Reciva-based radios (from companies like Grace Digital, Sanyo, and Sangean), Frontier Silicon-based connected audio systems, Slim Devices, and Sonos 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 Windows Phone, Android phones, BlackBerry platforms, HP webOS (used on the Palm Pre, Palm Pixi, Palm Pre 2, and HP Veer). Pandora was the provider for MSN Radio until MSN discontinued their internet radio service on June 18, 2008. 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 ads in Pandora Mobile for mobile phones and the Pandora in The Home computer appliance. Most users choose the free subscription.
In May 2010, Pandora was named in Lead411's 2010 Hottest San Francisco Companies list. In January 2011, Pandora met with investment banks to consider a possible $100 million IPO. The company filed with the SEC for a $100mm IPO on February 11, 2011 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.
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.
Using and tuning
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, other users' stations, or even create their own stations based on their musical interests. 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 or if that artist is listed under the station's variety. No response is applicable to musical attributes or to albums. An unfavorable response immediately stops play of the track. Clicking the thumbs down too many times in a row will result in a short ban of skips. Pandora also utilizes short advertisements in between every couple of songs.
In addition, a menu is provided with the choices: I'm tired of this song (allowing users to remove a song from the station temporarily); Why was this song selected? (allowing users to learn more about the composition of each song); Move song to another station; New Station; and Bookmark. A Buy button is located at the top of each song block as well. 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.
Savage Beast Technologies was founded by Will Glaser, Jon Kraft, and Tim Westergren. The initial technology was developed by Glaser with musical input from Westergren. The idea was to bring different styles of music together into a predictable pattern. They created 400 specifications for each song that is recorded to the listener's preferences to suggest other songs with similar characteristics. While the company was able to do some licensing of the technology to third parties like AOL and Best Buy for music recommendation, it did not achieve commercial success and nearly failed. In March 2004, Savage Beast Technologies received venture funding led by Walden Venture Capital's Larry Marcus to focus the technology on building its own consumer facing service. The new Board was formed to include the remaining founder Tim Westergren, Bob Kavner, Larry Marcus, and Larry Kubal of Labrador Ventures. In addition to Tim Westergren, a new management team was recruited that who conceived of and built the Pandora Radio product including CEO Joe Kennedy, VP Engineering Tom Conrad and VP Business Development Jessica Steel. The company was renamed Pandora Media and launched Pandora Radio on July 21, 2005. The Music Genome Project is one of core technologies currently used by Pandora to play music for Internet users based on their preferences.Today, there are over 35 million listeners, and the radio has become an app for many smartphones, including the iPhone, Android, and Windows phones.
In April 2013 Pandora announced that their radio streaming service had passed 200 million users, about 70 million of whom are active monthly.
On March 7, 2013, Pandora chief executive Joe Kennedy announced he would step down from his position, but remain until his successor is named.
Pandora plans to create a service that would allow users to request songs instantly, as well as a toll-free number to order front-row concert tickets. In September 2013, Pandora started carrying the morning talk radio show Kidd Kraddick in the Morning on demand; via a deal with YEA Networks.
On September 1, 2013, Pandora removed a 40 hour per month limitation for free mobile listening.
To comply with the requirements and protections offered by the DMCA, Pandora only serves users in the United States, New Zealand and Australia. Initially this was enforced lightly, by requiring a U.S. ZIP code at registration, but since May 3, 2007, Pandora has used IP addresses filtering.
Rewind or repeat is not permitted. 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 21 May 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. 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 is only after the song has completed that it becomes subject to the listener's restrictions. This limit was not applied to the Vista gadget. Play of a single artist is limited, as 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 had no advertisements.
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. This 40 hour limit on free listening was re-introduced in March 2013 for mobile devices. However, this limit was removed once more September of the same year.
Due to licensing restrictions, only one track per album can be played at a time. As certain albums such as The Dark Side of the Moon by Pink Floyd were designed to have each song segue into the next, this results in abrupt endings for the tracks.
As of November 2013, paid subscribers are allotted thirty combined skips per 24-hours alongside the six skips per hour for each station. This limit was not applied to the mini player.
The mini player has the following limitations:
- Songs cannot be moved to another station.
- Songs or artists cannot be seeded.
- Six skips per hour per station
Pandora is available on the Google Android OS (for tablets and mobile phones). It is ad supported and retains the original skip limits.
Pandora is available on the iPhone, but authorized downloads and installs are only possible with a US, Australian, or New Zealand iTunes account.
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. In March 2013, it's available on Windows Phone 8 as a free app with ad-free streaming until 2014.
The Pandora for BlackBerry application is limited to AT&T, Sprint, Verizon, T-Mobile, Boost Mobile, and U.S. Cellular carriers, but visiting the Pandora website directly other BlackBerry users have been successful in downloading the application.
Due to increasing royalty costs, users who used a free account on Pandora between late February 2013 and September 1, 2013 were limited to accessing 40 hours of music per month on mobile devices.
- Pandora Podcast (2006–2009), a musicology show that updated every few weeks in the form of a podcast. It was hosted by Kevin Seal of the band Griddle. Each show was based around a specific music topic, and featured guest musicians and Pandora experts who normally analyzed the music featured on the Pandora website.
- A Facebook application developed to allow users to put their Pandora radio stations on their Facebook profiles. However in 2012 with the release of Facebook's auto-publish tool Pandora decided to remove their application from Facebook.
- Pandora released a sidebar gadget for Windows Vista and Windows 7. This player retains the original skip limit, has no ads, and does not affect the hourly listening limit. However, many of the features (such as about the artist or adding to the station directly) are not included. Originally, an ad for Netflix was featured on the bottom of the player, but it has since been removed.
- Pandora can be played on home CE devices such as WD TV, Roku, Google TV, audio-video receivers, and Blu-ray players. Many HDTVs can also stream Pandora.
- Pandora can be played in some vehicles, including but not limited to those of the makes BMW, Buick, Ford, GMC, Honda, Hyundai, Lexus, Lincoln, Mercedes-Benz, MINI, Nissan, Scion, and Toyota. Some implementations have the ability to use voice commands to do things like change stations and give feedback on a song. Additionally, it is possible to purchase multimedia systems for your vehicle if it is not one of those that has been manufactured with the system already in the vehicle. These radio systems have the ability to use the Pandora app and have the same features as the systems in the vehicles that are manufactured with the systems included (excluding voice command). These radio systems are manufactured by companies such as Advent, Alpine, Clarion, Jensen, JVC Mobile Entertainment, Kenwood, Pioneer, and Sony.
Pandora decided to be a consumer-oriented music discovery service, specifically a non-interactive radio station. In the three months that ended October 31, 2011, advertising comprised 88% of Pandora’s total revenues. 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.
Pandora’s cost structure is highly variable, with content acquisition costs representing roughly 50% of total costs. 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. 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.
Pandora announced $80.8 million in total revenue for their first quarter of fiscal 2012, which was up 58% over their previous year Q1 results. Of the $80.8 million, $70.6 million came from advertising, while the other $10.2 million came from subscription. In addition, Pandora has seen a 62% advertising revenue increase, and a 38% subscription revenue increase year-over-year. However, the vast majority of Pandora's users remain on the free, ad-supported model.
Royalty developments since 2007
||This article or section appears to contradict itself. (April 2013)|
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 paid by satellite radio.
Because of the passage of DMCA in 1998 that increased fees and asked for licensing guarantees, the Pandora service is no longer available in countries other than Australia, New Zealand and the United States. These rulings affect all U.S.-based Internet-based radio stations (terrestrial radio is not affected).
As of July 2008, Pandora was 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.
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 had not been reached, it could have meant 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."
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". 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. Pandora has since introduced an option to purchase Pandora One subscriptions on a monthly basis at a rate of $3.99 per month. Also, in September 2013, Pandora began working with HitBliss to make Pandora One subscriptions available for HitBliss earned-payment.
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.
On December 9, 2011, the CEO of Spotify, Daniel Ek, announced Spotify Radio would offer an unlimited number of stations and unlimited skips. Though Pandora's usage is 70% mobile, the Spotify Radio app competes against Pandora's mobile market.
Pandora CEO Tim Westergren has supported the The Internet Radio Fairness Act or IRFA (H.R. 6480/S. 3609), which would reduce the company's royalty payments to the performers by 80 percent.
On November 5, 2012, Pandora filed suit in federal district court against ASCAP over royalty fees. In the suit, the company sought to advocate for lower licensing fees on all the songs represented by the ASCAP's 435,000 members. After arguing that both ASCAP and BMI were showing bias towards international broadcasters who own terrestrial radio stations, Pandora announced on June 11, 2013 that it would acquire a radio station in South Dakota, under the presumption that doing so would allow it to access the same preferential licensing terms offered to services such as iHeartRadio (which is owned by Clear Channel Communications, itself America's largest radio broadcaster).
On February 27, 2013, Pandora announced a 40-hour-per-month limit on free mobile listening. Pandora CEO Tim Westergren cited escalating royalty costs as the reason for the mobile cap.
On September 1, 2013, Pandora removed the 40-hour-per-month limit on free mobile listening (originally announced on February 27, 2013). Pandora stated that it was able to make this change "thanks to the rapid progress of its mobile advertising."
In November, 2013, Pandora added a limit of 32 combined skips per 24 hours for paid accounts.
In 2013, Entertainment Weekly compared a number of music services and granted Pandora a "B-", writing, "Free streaming radio, $36 a year to go ad-free. Launched in 2005, Pandora is available on just about every platform. There's no on-demand, though, and stations tend to draw from a relatively small pool of albums." (As of Feb. 2014 the cost was $3.99 by the month or $36.00 for a yearly subscription)
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