1 Business Policy and Strategy Pandora Internet Radio December 8, 2014 Karolina Campos Oleh Kramar Yamika Ketu Shivani Patel Caleb Yoon
2 Executive Summary To put it simply, Pandora Radio is a radio station that takes into account a listener’s music preferences and only plays songs that match his or her musical tastes. It is an automated music streaming service that serves as a custodian to the Music Genome Project, which is a complex system that analyzes music. Musical analysts listen to thousands of songs individually and examine them in detail on every track by studying the melody, harmony, instrumentation rhythm, vocals, and even the lyrics of each song. Pandora was the first streaming radio service to get mainstream attention and though it was successful at first, the company is now struggling to keep up with changes in the current economic markets. Pandora has a product differentiation strategy that serves the few needs of many customers. The services are offered on a variety based positioning and the company stays consistent with the services it offers. Pandora also faces many rivals and has a high threat for new entrants. In addition, both the supplier and buyer bargaining power is high because there are low switching costs involved along with several substitutes available for consumers. Currently the company offers two subscription plans: a free subscription supported by advertisements and a fee based subscription that eliminates ads. Subscription fees account for only 13 percent of the company’s total revenue while advertisement fees account for 87 percent of the total revenue. In 2013, the company made approximately $427 million in revenue, which was a good sign for its new CEO, Brian McAndrews. Pandora’s target customers are music lovers and advertisers. Consumers who listen to music use Pandora because it is a free online music streaming service and advertisers are able to reach a broad range of consumers through display, audio, and video messages. Pandora’s strongest strength is being able to personalize radio stations for customers while its biggest
3 weakness is paying for royalties at an expensive rate. An opportunity that the company can exploit in the near future is the decentralization of the music industry, whereas a threat that Pandora has to look out for is new technological advancements made by its competitors. There are several challenges that the company is facing today in order to keep up with the changing market but its biggest challenge is long-term profitability. In order to succeed in the long run, Pandora should incorporate a new cost effective, branding strategy that will allow it to move forward in the music streaming industry. Company History Pandora Internet Radio was founded in January 2000 in Oakland, California by Will Glaser, Job Kraft, and Tim Westergren. Before Pandora became one of the most used and top downloaded music applications in the iOS app store, the company endured many struggles in order to become successful. Pandora was originally called Savage Beast Technologies whose
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- Spring '10
- Streaming media, internet radio, Pandora Radio, Pandora Internet Radio, Music Genome Project