Pandora, you still there?

Spotify just went public, Apple Music just surpassed 40 million paid users, and Pandora is… well… what exactly is Pandora up to these days? Turns out Pandora is actually taking some steps to bring itself back from the brink of extinction. Question is, will they be enough?

The past few years haven’t been easy for Pandora, but it wasn’t always that way. In fact, when the platform launched in 2005 it offered a revolutionary service. Prior to Pandora Internet Radio, music listeners had to scour for songs across the Internet, and listening platforms like iTunes were still in its infancy. With Pandora, users could get automated music recommendations that were personalized to their tastes. Behind these recommendations was the Music Genome Project, a computer algorithm developed in-house capable of reverse-engineering music parts to find new music that is technically similar to listeners’ preferences. Listeners quickly became enamored by the opportunity for music discovery and Pandora’s stake in the industry looked promising. The company was quick to strike deals with major auto brands, like Ford, and Pandora became a common fixture on car dashboards.

In 2014, Pandora stock reached its peak at $37 per share. Screen Shot 2018-04-23 at 8.40.14 PMToday, a share of the company’s stock goes for just over $5. Pandora’s original concept of providing personalized radio just isn’t enough anymore. Today, listeners expect on-demand services, like Spotify, that allow them to find and play music whenever and wherever. Pandora may have entered the entertainment industry with a novel idea, but it failed to see the value behind things like on-demand streaming and ad-free subscriptions. By the time Pandora Premium was unveiled in 2016, it was already too late. As tech analyst Gene Munster states, “when Pandora was just ramping, it was thought that radio was the future of how most wanted to interact with music. And what Spotify did was add controls and sharing playlists, and [Pandora] just missed that.” Since then, only 7% of Pandora’s 81 million listeners have chosen to convert to paying for an ad-free subscription. To put that into perspective, of Spotify’s 159 million users nearly 71 million pay for the Premium service.

Pandora has also had its fair share of management shakeups and questionable acquisition decisions. In the summer of 2016, Pandora was in talks with Liberty Media, a mass media conglomerate. The deal supposedly had Liberty Media offering $15 per share, which would have valued Pandora at $3.4 billion. Talks ended, however, when Pandora’s board turned down the offer. Reports that followed indicated that the board felt that the Liberty Media offer undervalued Pandora stock. In June of 2017, satellite radio company SiriusXM made a $480 million investment in Pandora, which gave it a 16% stake in the company and 2 board seats. Later that same month, co-founder Tim Westergren announced that he would be stepping down from his positions as both Pandora CEO and board member. The company, which was clearly already vulnerable, was now left without a frontman. To round out a crazy summer, Pandora announced that it would be selling Ticketfly, a ticketing platform it acquired back in 2015 for $450 million, to Eventbrite for only $200 million. Now, I may not be a finance major, but that does not seem like a great deal to me.

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So why bring up Pandora now? Well, just last month the company announced that they would be purchasing an ad tech startup called AdsWizz for $145 million. 582eb13f76e96.image.jpgAdsWizz is the company behind the audio ads heard on platforms including Pandora, Spotify, and Soundcloud. According to Scott Walker, SVP of Pandora’s ad strategy, the acquisition of AdsWizz points to a couple of goals. Mainly, Pandora will be able to expand its business interests and gain a new source of revenue. What’s interesting is that Pandora plans to operate AdsWizz as an independent subsidiary, which means that the advertising company will continue to serve Pandora’s competitors. Analysts question the deal for several reasons. Some wonder whether other audio publishers will be willing to work with a company that is owned by one of their rivals. Others are not confident that Pandora will gain more from buying AdsWizz than they would by just paying for its services.

The overall tone following the acquisition is can be described as critical. Pandora desperately needs to find more ways to make money and becoming a power player in the ad space overnight at this point seems unlikely. But I’m curious to hear what you guys think. Is Pandora as we know it doomed? Or do you see this recent acquisition as the start of a new era for the company?

 

9 comments

  1. mpduplesmba · ·

    Nice summary of Pandora’s history, challenges, and future. I enjoyed your post because apparently I am one of the few people left who uses Pandora (disclaimer: I also use Spotify)! The main reason I’m still an avid (non-paying) Pandora user is because Spotify is lacking in one aspect…it doesn’t have an Apple TV app. I’m not sure if this is Spotify’s choice or if Apple blocks them. In my apartment my TV has an Apple TV and a soundbar system that I like to play music from when I’m hanging out, doing laundry, cooking, etc. I could probably stream Spotify from my iPhone to the Apple TV, but I like using an app on the TV. Plus, I started using Pandora in college back in 2008, so I get to go back and listen to all of my original channels.

  2. nescrivag · ·

    Really cool Post, Margaret! I have to be honest… I totally forgot that Pandora was a thing. I remember my roommate from boarding school would listen to it but that was 5 years ago. I only ever hear about Spotify nowadays. Last semester we had to do some assignments in my Marketing Research class about Tidal, another subscription music streaming platform. I had never heard about it before but it is basically the same as Spotify, except they also have high definition videos.
    Since there are already two players (and probably many smaller ones) in the music streaming industry, I am not sure that Pandora can get back on its feet and compete against them. They company would really need to find a feature that will distinguish it from the rest. Personalized radio is not enough because people like to select what they listen to (I know I always keep switching radio channels until I found a song I know. The deal may help Pandora earn more revenue but I don’t think it will help the company against the existing competition.

  3. Nice post. I had forgotten about Pandora in the music wars recently. Thanks for the update!

  4. murphycobc · ·

    It will be interesting to see if Pandora makes it out alive in the next few years. I think the current music consumer wants their tunes on demand and on the go. I actually use Pandora, but only through my TV as well like @mpduplesmba. Otherwise, Spotify offers me the same thing, but with more control because I can see the playlist upcoming – even on forced shuffling I feel like I have more access, and can choose playlists based on the songs I know will come eventually.

    Pandora used to be the big name, but its a big example on how if you don’t compete and keep up with the tech curve, you can quickly fall behind!

  5. profgarbusm · ·

    I do not necessarily think Pandora is doomed, but I definitely believe that they will have to cater to a niche market and are out of the “main game”. I’m not a huge user of pandora but I remember a few years ago my mother was nuts about the service. I think Spotify creating suggested playlists like Daily Mix etc really took away Pandora’s edge. I do think it’s interesting they’re investing in Adswizz and the whole concept of audio advertisments (new not old radio ones). I do think their is a huge ceiling here and tons of opportunity, particularly if they can integrate onto Alexa – it will definitely be interesting to see how it all plays out!

  6. katietisinger · ·

    Love this post Margaret! It reminds me of something Lindsay Sutton talked about when she came to our class. She said she had been convinced to put ads on Pandora because the majority of their users do not pay for the premium service and still listen to ads. I thought that was really interesting, and it aligns well with Pandora’s new strategy of purchasing Adswizz.

    I wonder why Pandora has not worked to innovate more, even following in Spotify’s footsteps. Our economy today clearly wants a more personalized, individualized experience, which is what Pandora was founded on. I would be interested to see their investment in innovation and how they view the industry changing. They seem to have had a similar business model since the beginning, and I wonder if Adswizz will be enough to help them succeed.

  7. Addison LeBeau · ·

    Great post Margaret! It seems right that you’ve brought the spotlight back to Pandora with this post, as I had forgotten about it as well, but used to be such a big fan. It’s always informative to study how brands that seemed to be ahead of the tech curve can fall behind so drastically. I especially liked how you highlighted their acquisition of AdsWizz. This headline seems promising – Ad tech, what could go wrong?! – however it was interesting to hear how Analysts are questioning the deal. Now that I’ve been informed through your post, I’ll definitely be keeping a look out to see how this all plays out. Well done!

  8. I really like this post! When I think of Pandora now, it seems like it is slowly becoming the MySpace of the music streaming industry. That being said, it also seems like they are still fighting, but will it be enough? Interestingly enough, Pandora is still luring in companies to advertise on their platform. Some might as why, since Pandora really does not have many users. But, unlike other streaming services such as Spotify and Apple Music, the majority of Pandora users have the right demographics and do not pay for the ad free service. Therefore, a dollar spent on Pandora advertising is actually more than Spotify, since more people will actually hear it.

  9. tuckercharette · ·

    I think Pandora also just missed the boat a bit. While Spotify had on demand music and the ability to give me what I wanted, when I wanted it, Pandora had this cool radio function. While I didn’t originally want to pay for Spotify, I did want to have this free radio thing which could feed me cool recommendations for music without me having to input anything other than thumbs up and thumbs down. I used iTunes for my on demand music and Pandora for mindless listening.

    However, it was when these two services were paired on spotify that I was hooked and never looked back. Pandora lost me because Spotify could give me great recommendations and then I could use that data to seemlessly add the songs to playlists for later listening. I gave up on iTunes and never turned back.

    Why did Pandora take a stake in AdsWizz. I would say that maybe Pandora thinks they can use their recommendation algorithms to target ads better than AdsWizz was but frankly I agree, it was a desperate last ditch move to try to save a company down the drain.

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