Can Pandora’s current business model help it become the global leading online Internet radio service？
Since its initiation in July 2011, Pandora’s impressive revenue is mainly derived from advertising and paying subscribers in the early years. And due to the severe competition in the online music market, Pandora is, just like most other “freemium” internet business, struggling to be profitable and sustainable.
-What is the customer value proposition Pandora could offer?
Pandora offers a “personal” radio station to its audience. And Internet radio station Pandora has a demanding audience, approximately 20 million. When listeners visit www.pandora.com or download the Pandora application to their mobile phone, they primarily want one thing — to hear music they like.
Therefore, for Internet radio station Pandora, streaming audio to millions of users takes a fast and reliable network. According to Steve Ginsberg, former CIO of Pandora. “While price is an important part of how we choose a carrier, the more important part is that we maintain that listener experience.”
-What is Pandora’s business model?
The original business model of Pandora was to provide customers with 10 hours of free time, and if they were satisfied with it, they would pay a subscription fee of $36 per month to continue using it.
And its current business model has changed. Now customers can have a free trial for 40 hours. After that, they will get three choices: (1) pay 90 centers for the rest of the month; (2) buy advanced services with wireless access rights; (3) stop the service after the trial period, but they can still participate in the trial experience next month.
-What are the benefits of Pandora’s current business model?
The change of business model has brought more possibilities and benefits to both Pandora and customers, giving users more choices. In the past business model, the free time is not very generous, and the monthly subscription fee is a little expensive; after the change of business model, no matter which choice customers make, they get a better use experience, and the cost is significantly reduced.
As it was said before, currently after the 40-hour free trial, customers have three options. Firstly, pay 90 centers for the rest of the month, then their monthly use of Pandora is basically maintained at a stable level. Compared with the original business model, customers would get more free hours and pay less subscription fees. For the company, although the income from a single customer becomes less, it may produce the effect of small profit but quick turnover.
The second option is buying advanced services with wireless access rights, the customers who make this decision are loyal customers of Pandora and get more services and better use experience through higher payment. For companies, they get more revenue from a single customer, and this kind of users may have a higher willingness to try other services developed by the company in the future.
The third option is stopping the service after the trial period, but customers can still participate in the trial experience next month. In the past, they had to pay $36 a month, which may be so uneconomic that they gave up using Pandora. In the new business model, the free time is enough to meet their needs. Even if they can’t get benefits from these customers for the time being, they can keep it A larger customer base can bring more possibilities for the future, and users are the foundation of business.
-Can Pandora’s current business model help it realize its vision and dream?
Pandora’s vision is to be the global leading online Internet radio service and to have billions of listeners all over the world. And Pandora’s dream is to be widely available in all devices where there is Internet connectivity. After changing its business model, there’s no doubt that the above personalized subscription service can better face different needs and different consumption levels of users, and such changes can bring more traffic and higher customer retention rate, which brings more possibilities for Pandora to expand other aspects of revenue, such as refining advertising options, generating profitable partnerships with artists, wireless carriers and other online businesses, and exploring the option of merchandise..
In a word, the answer of the question “can Pandora’s current business model help it become the global leading online Internet radio service?” must be “yes”.
