www.pandora.com Katie Grien and Abby Liebeskind
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
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
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
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
Why are We Interested? Abby s independent study We are users of the service Very timely- Pandora is in the news a lot lately
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
Will Pandora Be Successful? Pandora s Business Model Innovation State of Competition Legitimization Population Ecology Demographics and Social Networks
Pandora s Business Model Profit = Revenue Cost Pandora s revenue Advertising Referrals Subscription users Pandora s cost Royalties Employees Etc Broadcast Radio Satellite Radio
Pandora s Business Model
Innovation Industry Changes Changes in Perception
Competition Threat of new entrants Bargaining power of suppliers Bargaining power of buyers Threat of substitute products Rivalry among existing firms
Threat of New Entrants Economies of scale Product differentiation Capital requirements Switching costs Access to distribution channels Government policy
Bargaining Power of Suppliers Big Four record label oligopoly Universal Music Group Sony Music Entertainment Warner Music Group EMI Group Independent artists and labels
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
Threat of Substitute Products Free music Other online music sites Last. FM, imeem, Muxtape, etc. Traditional radio Satellite radio
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
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
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
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
Population Ecology Theory Continued
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)
Social Networks and Structural Holes Musicians Classmates From Stanford In Business Tim Westergren Producer Dotcom Friend
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
Our Final Prediction Pandora WILL be successful if the industry structure changes, and soon!
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 http://business-model-design.blogspot.com/2006/07/eternal-beta-pandoras-businessmodel.html Day, B. (2008, May 30). Opening Pandora s Box. TechCrunch. Retrieved November 19, 2008, from http:// www.thetechlounge.com/article/278/opening+pandoras+box/ Frontier Silicon. (2008, November 5). Digital Radio Summit, Tokyo. Retrieved November 19, 2008, from http://www.frontier-silicon.com/events/08/11_tokyo/ Future Exploration Network. (2008). Web 2.0 Framework. Retrieved November 19, 2008, from http:// www.rossdawsonblog.com/web2_framework.pdf Google Trends. (2008, November 23). Google. Retrieved November 23, 2008 from http://trends.google.com Internet Radio Equality Act. (2008 July 20). In Wikipedia, The Free Encyclopedia. Retrieved November 22, 2008 from http://en.wikipedia.org/wiki/internet_radio_equality_act Jobs, S. (2007) Thoughts on Music. Retrieved November 19, 2008, from http://www.apple.com/hotnews/thoughtsonmusic/ Kaiser, N. (2006, October 26). npost Interview with Tim Westergren. Retrieved November 19, 2008, from http:// www.npost.com/interview.jsp?intid=int00176 Leggio, J. (2008, September 18). Pandora opens up: Q&A with Tim Westergren. Retrieved November 19, 2008, from http://blogs.zdnet.com/feeds/?p=240 List of Music Genome Project attributes by type. (2008, November 16). In Wikipedia, The Free Encyclopedia. Retrieved November 24, 2008, from http://en.wikipedia.org/w/index.php title=list_of_music_genome_project_attributes_ by_type&oldid=252197107 Liu, S. (2007, May 15). Folksonomy Interview with Pandora. Retrieved November 19, 2008, from http:// www.folksonomy.org/2007/05/interview_w_pandora/
References Continued Pandora. (2008, November 23). Pandora Radio. Retrieved daily, most recently November 23, 2008, from http:// www.pandora.com Pandora Radio Blog. (2008, November 23). Pandora Radio. Retrieved daily, most recently November 23, 2008, from http://blog.pandora.com/pandora/ Sandoval, Greg. (2008, September 30). Pandora, Webcasting see Victory in Senate. Retrieved November 23, 2008 from http://news.cnet.com/8301-1023_3-10055055-93.html SaveNetRadio.org. Myths and Facts about the Cost of Webcasting. Retrieved November 24, 2008 from http:// www.savenetradio.org/about/myths_and_facts.html Sirius, R. (2007, May 3). Closing Pandora s Box: The End of Internet Radio? Retrieved November 19, 2008, from http://www.10zenmonkeys.com/2007/05/03/closing-pandoras-box-the-end-of-internet-radio/ Buskirk, E. (2008, July 6). Listening Post's Top 10 Hottest Music Sites. Wired-Listening Post. Retrieved November 19, 2008, from http://blog.wired.com/music/2008/07/listening-posts.html