The Changing Pandora Business Model


CEO Tim Westergren and his new team get a very long profile piece by John Titlow in Fast Company as Westergren dives into his new role as CEO replacing Brian McAndrews. The article, entitled “Inside Pandora’s Plan To Reinvent Itself—And Beat Back Apple And Spotify,” details why Westergren has his work cut out for him.

“In 2015, the company failed to grow its audience beyond the 81 million listeners it had at the beginning of the year. And while it pulled in $1.16 billion in revenue last year, it was still $170 million short of profitability.” Titlow says the profitability misses should be blamed on music licensing fees, which do not apply to terrestrial radio or on-demand music services, eating up half of Pandora’s revenue.

Titlow says in 2016, personalized radio alone just doesn’t cut it. “As a business, it’s incredibly expensive to operate, and it’s difficult to scale beyond the U.S., Australia, and New Zealand, thanks to the unique music licensing rules that govern Internet radio broadcasters. Meanwhile, listeners’ expectations have changed since Pandora’s heydey. The rise of on-demand services like Spotify, SoundCloud, and Apple Music have given people more control over their listening experience, allowing them to find and play whatever tracks they want, when they want.”

As a result, according to the article, Pandora is getting ready to make some major changes to its product and business model. It’s a two-pronged strategy. “Turn Pandora into a more comprehensive, Spotify-esque place for listening to music, while also making it a more valuable resource for musicians.” “We want to be a one-stop shop for artists and for listeners,” Westergren tells Titlow. “And all that activity will turn into a set of businesses.” Titlow ads, “That isn’t to suggest that profits will explode once the switch is flipped, but if all goes according to plan, Pandora is hoping its road ahead could be a bit less bumpy.”

Read the Fast Company article HERE



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