Catherine Ardito, Victoria Gersh, Ryan Kelly, and Caroline Vettese

• Mission: “To play only music you'll love. (OK, we've added comedy as well so we're also up for playing some jokes you'll love.)“

• Type in favorite artists, songs, composers, genres (or comedians) and Pandora provides up to 100 unique “stations”

• Thumbs UP/ Thumbs DOWN Option

What is Pandora?

• Uses Music Genome Project to provide a unique tailoring of music for each listener

• “The most comprehensive analysis of music ever undertaken.”

• Analyzes a world of songs that span over 100 years

• Suggests songs based on songs listeners give a thumbs up and down to

• Each song is listened to and analyzed for specific characteristics by "musicologists"

• The Music Genome Project is updated daily basis

Music Genome Project

Organizational Information

• Headquartered in Oakland, CAo Other Offices: New York, Los Angeles, Chicago,

Detroit, Atlanta, and Dallas

• Pandora is a public company whose stock is traded on the NYSE at a price of $10.38 as of September 25, 2012

• Joseph Kennedy is the company Chairman and CEO

• Revenue FY2012: $274,340,000

• Over 125 Million registered users in the United States

• Over 900,000 songs in its catalog

• Over 15 Billion Thumbs Up o show they’re doing a good job of providing users

songs they like

Statistics

Demo

http://www.pandora.com

Where to access Pandora

• Pandora has become an App on all smartphones making their music accessible everywhere

• Available on over 600 different consumer devices

• Many stand alone players

o Roku

o Slim Devices

o Apple products

o Blackberry

o Android

o Windows Mobile devices

Types of Subscriptions

• Free Subscriptiono Can listen to music at any timeo advertisements

• Paid Subscriptiono Can listen to music at any timeo no advertisements

Pandora's Biggest Fear

Apple • Apple Inc. is planning to introduce its own competing online custom radio

service through iTunes.

• The day after Apple’s plans emerged earlier this month, Pandora Media’s stock plunged 17 percent and has still not recovered.

• Apple’s iTunes store had a 64 percent share of all digital music sold in the United States for the second quarter

• With Apple’s reach, and its ability to pre-install an app to every mobile device it ships, any Internet radio service it offers could quickly

• build a huge following.

Risk FactorsRisk Factors that could cause or contribute to differences from

projected financial status include, but are not limited to:

1. Competitive Factors

2. Ability to continue to innovate and keep pace with changes in technology and our competitors in hypercompetitive markets

3. Ability to increase our listener base and listener hours

4. The operation in an emerging market and relatively new and evolving business model

5. Ability to generate additional revenue on a cost-effective basis

6. Ability to continue operating under existing laws and licensing regimes

Competitive Factors

• Spotify Radio is the biggest new feature in today's app release.

• Spotify offers 16x more songs to listeners at 15 million versus Pandora at 1 million

• Spotify offers a bundled unlimited plan that allows you play whatever song you desire.

• Spotify's goal is to become "ubiquitous" on all platforms, moving quicker and quicker to shift its priorities towards mobile.

Spotify vs. Pandora

Competitive Factors

• Songza is based on the principle that using Pandora requires too much thought.

• “Our whole premise is not that this is more gamified than Pandora, or has more elite features,” Mr. Roman said. “It’s that this is simpler and more directly related to the thing you want, which is music to make whatever you’re doing better.”

• Songza carries no audio advertising because it makes money from display ads and from partnerships with other media companies.

• When Songza introduced a new version of its mobile app this month, it was downloaded 1.15 million times in 10 days shooting to the top of Apple’s App Store rankings, passing Pandora.

Pandora's Business Model and Problems

• The earnings report indicates that the vicious cycle within Pandora's model is getting, well, more vicious.

• Unless Pandora can raise ad prices or increase the number of ads it plays, it will remain in real trouble.

• Pandora has to pay royalties on every song it plays: the costs rose to $101 million, while their revenues are $80.7 million.

• Those royalty fees will increase in 2015, threatening Pandora's long-term success.

Graph. The graph shows that Pandora's revenues are falling behind its operating costs:

Pandora in trouble...

• Pandora is pushing users to write their Congressmen to support a newly introduced bill called the Internet Radio Fairness Act.

• The issue is Pandora’s own weak business model.

• BTIG analyst Richard Greenfield, "the reason why companies such as Pandora pay such high royalty rates as a percentage of revenues is because they severely limit audio advertising to protect the user experience and keep people on the platform. If Pandora ran several minutes of audio ads per hour, the percentage of revenues paid out as royalties would be dramatically lower. "

• Greenfield claims Pandora’s royalty rate should be increasing, not decreasing, “which would force them to either increase the ad load and survive at that ad load or find other ways of generating revenue to sustain their service.”

The Future of Pandora

In the near future, Pandora is planning on:

• Broadening listener base

• Focusing on execution

• Getting on more devices

Broadening Listener Base

• Currently operating under licensing from the federal government

• In 2014, negotiations will begin to determine the future for after 2015

• Hopes to go international

• "Pandora's story in the US becomes so positive that it becomes more and more ridiculous that we're not licensed in other places"

Execution

• Only play music the listener wants to hear

• No changes to ruin the industry

• Expansion

Product Innovations

New Devices: - Vehicles

Deal with companies such as Ford, Honda, Acura

- Home Electronics Televisions Wifi Devices

New Content:- Video- Comedy

Questions

• How else do you see Pandora expanding?

• Do you think Apple's invention of their own music radio will increase or decrease their revenue considering Pandora is already so well known?

• Even though Pandora and many other emerging technologies are so vulnerable to competition, why do you think many people still choose to invest in them?

• Do you think Pandora would be as successful in other countries as it is in the United States? Do you think it would give them a competitive advantage?

• Would you pay to use Pandora?