Company LOGO. Katie Grien and Abby Liebeskind.

Transcription

1 Katie Grien and Abby Liebeskind

2 Agenda Description of Pandora Tech Interest History Will Pandora be successful? Profit Model Innovation State of Competition Legitimization Population Ecology Demographics and Social Networks Implications and conclusions Questions

3 What is Pandora? Pandora is an Internet radio service that allows users to create personalized, interactive, commercial-free, dynamic online radio stations. Free or subscription options Demo

4 The Music Genome Project The engine behind Pandora that incorporates user s input Musicians assign genes to songs Pandora s algorithm matches genetically similar songs

5 Genes for lyrical content Abstract Lyrics Ambiguous Lyrics Angry Lyrics Angry-Romantic Lyrics Blazin' Rappin' Boastin' Lyrics Cash-Obsessed Lyrics Clean Lyrics Cocky Lyrics Defiant Lyrics Erotic Lyrics Explicit Lyrics French Lyrics Great Lyrics Heartbreak Lyrics Heartbreaking Lyrics Humorous Lyrics Joyful Lyrics Lyric-Centric Aesthetic Lyric-Centric Composition Lyric-Centric Performance Lyrical Melodies Lyrics about Alcohol and Drugs Lyrics about Partying Lyrics about the Rap Industry Lyrics by a Famous Rap Artist Lyrics by a Rap Icon Lyrics by a Respected Rap Artist Lyrics that Tell a Story Lyrics that Use Twisted Humor Lyrics with Heavy Erotic Content Narrative Lyrics Offensive Lyrics Political Lyrics Political Satire Lyrics Portuguese Lyrics Positive, Upbeat Lyrics Production and Lyrics by Famous Rap Artists Production and Lyrics by Famous Rap Icons Production and Lyrics by Respected Rap Artists Religious Lyrics Romantic Lyrics Sad Lyrics Sexist Lyrics Socially Conscious Lyrics Storytelling Lyrics Street Talkin Lyrics Surreal Lyrics Tight Lyrics Upbeat Lyrics Violent Lyrics

6 Why are We Interested? Abby s independent study We are users of the service Very timely- Pandora is in the news a lot lately

7

8 History Tim Westergren, CEO and founder, began Pandora in March 2000 with the Music Genome Project Pandora was funded by venture investors in Silicon Valley Pandora weathered the dotcom bubble burst and today has over 17m registered users

9

10 Will Pandora Be Successful? Pandora s Business Model Innovation State of Competition Legitimization Population Ecology Demographics and Social Networks

11 Pandora s Business Model Profit = Revenue Cost Pandora s revenue Advertising Referrals Subscription users Pandora s cost Royalties Employees Etc Broadcast Radio Satellite Radio

12 Pandora s Business Model

13 Innovation Industry Changes Changes in Perception

14

15 Competition Threat of new entrants Bargaining power of suppliers Bargaining power of buyers Threat of substitute products Rivalry among existing firms

16 Threat of New Entrants Economies of scale Product differentiation Capital requirements Switching costs Access to distribution channels Government policy

17 Bargaining Power of Suppliers Big Four record label oligopoly Universal Music Group Sony Music Entertainment Warner Music Group EMI Group Independent artists and labels

18 Bargaining Power of Buyers Music is very important to users of Pandora, but is Pandora very important to them? Pandora s iphone Application is a big incentive (pressure) for consumers to use Pandora over other internet radio systems that cannot offer the same mobility Pandora has good revenues from advertising, referrals, and subscriptions, but costs are limiting their profit

19 Threat of Substitute Products Free music Other online music sites Last. FM, imeem, Muxtape, etc. Traditional radio Satellite radio

20 Rivalry Among Existing Firms For the most part, Pandora is the best known within a market of fairly unique offerings Pricing Advertising Target audience Cooperative

21 Theory of Legitimization: Loci of Rationalization Elite Organizations Stanford University Apple Sciences and Professions Sound Exchange Recording Industry Association of America Nation-States Congressional Acts Webcaster Settlement Act Internet Radio Equality Act Copyright Royalty Board Only available in the United States

22 Copyright Royalty Board: Why Are the Congressional Acts Necessary? These rates will cause webcasters to go bankrupt, so in 2007, the Internet Radio Equality Act was created The legislation was abandoned in Committee as of July of this year

23 Population Ecology Theory When the density of organizations within a new niche is low, legitimacy is also low Routines for reliability and accountability has not yet been developed When legitimacy is low, founding rates are low Niche becomes more attractive later Has the market for internet radio reached carrying capacity yet? Pandora, Last.fm, SHOUTcast Radio, Live365, Slacker, etc

24 Population Ecology Theory Continued

25 Demographic Approaches: Human Capital Theory Tim Westergren General human capital Stanford University Studied computer acoustics and recording technology Specific human capital Musician Award winning composer Record producer 20+ years of experience Film converter Entrepreneurial experience Friend in dotcom era (1999)

26 Social Networks and Structural Holes Musicians Classmates From Stanford In Business Tim Westergren Producer Dotcom Friend

27 Implications and Conclusions Music Industry Business model must change How long can Pandora wait? IF change occurs, how will it happen? Government forces? Market forces? Revenue streams must be greater than royalties and other costs Continue to grow the consumer base in the meantime

28 Our Final Prediction Pandora WILL be successful if the industry structure changes, and soon!

29 References Bruno, A. (2008, May 31). 6 Questions with Tim Westergren. Billboard, 120:22, 12. Business Model Design and Innovation. (2006, July 4). The Eternal Beta: Pandora s Business Model Design. Retrieved November 21, 2008, from Day, B. (2008, May 30). Opening Pandora s Box. TechCrunch. Retrieved November 19, 2008, from Frontier Silicon. (2008, November 5). Digital Radio Summit, Tokyo. Retrieved November 19, 2008, from Future Exploration Network. (2008). Web 2.0 Framework. Retrieved November 19, 2008, from Google Trends. (2008, November 23). Google. Retrieved November 23, 2008 from Internet Radio Equality Act. (2008 July 20). In Wikipedia, The Free Encyclopedia. Retrieved November 22, 2008 from Jobs, S. (2007) Thoughts on Music. Retrieved November 19, 2008, from Kaiser, N. (2006, October 26). npost Interview with Tim Westergren. Retrieved November 19, 2008, from Leggio, J. (2008, September 18). Pandora opens up: Q&A with Tim Westergren. Retrieved November 19, 2008, from List of Music Genome Project attributes by type. (2008, November 16). In Wikipedia, The Free Encyclopedia. Retrieved November 24, 2008, from title=list_of_music_genome_project_attributes_ by_type&oldid= Liu, S. (2007, May 15). Folksonomy Interview with Pandora. Retrieved November 19, 2008, from

30 References Continued Pandora. (2008, November 23). Pandora Radio. Retrieved daily, most recently November 23, 2008, from Pandora Radio Blog. (2008, November 23). Pandora Radio. Retrieved daily, most recently November 23, 2008, from Sandoval, Greg. (2008, September 30). Pandora, Webcasting see Victory in Senate. Retrieved November 23, 2008 from SaveNetRadio.org. Myths and Facts about the Cost of Webcasting. Retrieved November 24, 2008 from Sirius, R. (2007, May 3). Closing Pandora s Box: The End of Internet Radio? Retrieved November 19, 2008, from Buskirk, E. (2008, July 6). Listening Post's Top 10 Hottest Music Sites. Wired-Listening Post. Retrieved November 19, 2008, from