Newly-public Pandora Media (N: P), the largest personalized internet radio provider, held a Financial Analyst Day on 7/12 in San Francisco. The event, which aimed to educate the financial community about Pandora’s technology, business model and plans for growth, launched with CEO Joe Kennedy evangelizing the service: “I think everyone knows at this Point that Pandora is all about re-defining what radio is for a connected world. I think the size of the radio category is just extraordinary. According to Arbitron, just the traditional AM-FM audience is 93% of the U.S. population 12 and up…that’s so much listening that it represents 80% of the music consumption of the average American…Pandora takes this massive category and delivers a dramatically better experience. Pandora redefines radio by taking the very best of what has made broadcast radio so successful for the past 100 years and combining it with the capabilities that the internet uniquely enables.”
Huh? Pandora plays music and commercials with no talent. Just playing music is not what has made broadcast radio successful, as we know.
“We believe that we’re at the tipping point in the transition of radio delivery from broadcast to internet,” Kennedy added. “With the internet now able to reach all of the places where radio has historically been consumed, and with consumers now expecting a personalized experience, we believe the foundation has been laid for the next 100 years of radio.”
Pandora’s share of all radio listening in the U.S. is now at 3.6% (June figures). It garners some 60% of all internet radio listening here as well.
“As excited as we are over the start we’ve had over the past 5.5 years, the truth is this is just the beginning. Only 6% of the category has transitioned to internet delivery,” noted Kennedy. “So we just have an amazing amount of runway in front of us.”
The business model is based off of 90% advertising; 10% subscription (from its Pandora One ad-free offering). “It shouldn’t be surprising that advertising is the core of our business model, since radio has been ad-supported, free-to-consumer for almost 100 years.”
We have to mention, though, that free usage is limited to 40 hours per month per user – something advertisers may not be thrilled with.
The plan to grow listener share will be implemented by expanding their distribution footprint, enabling listeners to hear their Pandora everywhere they want. Right now, Pandora is just about everywhere – in some vehicles, wi-fi radios, aftermarket car radios, Blu-Ray players, iPTV sets, mobile apps and even refrigerators.
Improving the company’s monetization will rest largely upon innovative ad solutions for clients. As well, plans are to increase the percentage of inventory that they sell – particularly on mobile devices – and continuing to gradually increase the amount of ads they sell on Pandora. Of course, local and national ad sales forces are being increased, too.
RBR-TVBR observation: Back to one of the points we’ve made. A mobile jukebox that tends to play what it thinks you like will remain just that until they can attempt some sort of local appeal beyond just advertisers. Perhaps some of the songs picked will eventually add some audio info about the artist and song from a commentator or the artist themselves. It will still not be live and local, which is the essence of radio. The question may remain however, whether the social media aspects of Pandora will end up taking the place of hosted radio in the sense of community and sharing that traditional radio has always brought to the table.
Related report: Pandora execs address analyst questions
