Donnelly+Strategy+Report

TO: Proximity music team FROM: Ian Donnelly DATE: January 6, 2010 SUBJECT: Pandora strategy analysis

Here is my Pandora strategy analysis. Pandora currently dominates the online music market, and is one of the few online music services to successfully utilize advertisements for profit. Gen Y users have adopted Pandora as their primary source for online music because it offers free service and feedback based music recommendations automatically.


 * Profile**

Pandora is an online music service which provides free radio based on a user's music tastes. It was created in 2000 through the Music Genome Project and founded by accomplished musicians Will Glaser, Jon Kraft, and Tim Westergren. It is run by the company Savage Beast Technologies (Wikipedia 2009). Now based in Oakland, California, Pandora's CEO is Joe Kennedy (Pandora 2009).

Pandora's revenue comes from 2 sources:
 * Advertisers who use Pandora as a marketing tool.
 * Consumers who subscribe to Pandora for an Ad-free service and extended listening.

Pandora currently has over 40 million users.


 * Competitive Landscape

Pandora is not the only online music service on the internet, and services such as Last.FM ** and iLike still compete with Pandora for users. Users hold a consumer power over Pandora for their position with advertising. Pandora currently leads in registered usage with 600,000 new users every week (Siegler 2009).

The monopoly that the music industry holds over the royalty rights to recorded music also affects Pandora's business. Copyright enforcement in streaming online music is more expensive than any other form of radio. Pandora is no longer in any country other than the United States and is forced to pay high royalty fees for every song it plays (Westergren 2009).


 * Pandora's Strategy

Pandora has become the top online music service by offering a unique form of radio. Its service is feedback based and users can customize their stations. Every song played is based on the user's musical taste and is interpreted by Pandora using over 400 attributes for each song. The ability to disapprove and skip songs effects future selections. This new approach to radio has become a prominent idea in the music culture.

Pandora produces a profit by offering the ability to purchase any song it plays instantly through iTunes and Amazon. The service has additional advertisements on its website and mobile phone application. An ad-free version of Pandora is available for a monthly fee of $0.99. A free user is allowed 40 hours of streaming music per month, and any additional usage is $0.99 (Wikipedia 2010). The Pandora's popularity keeps the company enticing for advertisers and safe from falling under high royalty fees. **

The popularity of Pandora is largely due to the 18-24 year-old demographic (Siegler 2009). The online music service is a leading source of communication for advertisers and the recording industry to connect with Gen-Y.
 * Gen-Y Implications**

Gen-Y's support of Pandora is also changing the face of radio. Its integration into mobile phones has made it easily accessible and favored among music services. The decline of FM radio has been answered with online music, and Pandora is leading the new trend. **


 * References**

Wikipedia (2009, December 14) Music Genome Project. Retrieved January 6, 2010 from http://en.wikipedia.org/wiki/Music_Genome_Project.

Pandora (2009). Leadership Team. Retrieved January 6, 2010 from http://www.pandora.com/corporate/team

Siegler, MG. (2009, Dec. 16) As Online Music Falters, Pandora Doubled to 40 Million Users This Year. The Washington Post, TechCrunch. Retrieved Jan. 6, 2010 from []

Westergren, Tim. Important Update on Royalties. Blog.pandora.com (2009, July 7). Retrieved January 6, 2010 from http://blog.pandora.com/pandora/archives/2009/07/important_updat_1.html

Wikipedia (2010, January 4) Pandora Radio. Retrieved January 6, 2010 from http://en.wikipedia.org/wiki/Pandora_Radio.