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Caselet 13: Pandora Radio: Fire Unprofitable Customers?: Key Aspects About Pandora's Business Model

Pandora's business model relies on personalized music streaming that is free to users. It generates revenue primarily from advertisements. There are two types of customers - free users who stream with ads, and paid subscribers who pay $5/month for an ad-free experience. Key indicators that Pandora's model is working include growing numbers of active users, time spent listening, and advertising revenue. Maintaining high customer loyalty through a free basic service and personalized recommendations is also important to the model.

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Aiswarya Mishra
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427 views2 pages

Caselet 13: Pandora Radio: Fire Unprofitable Customers?: Key Aspects About Pandora's Business Model

Pandora's business model relies on personalized music streaming that is free to users. It generates revenue primarily from advertisements. There are two types of customers - free users who stream with ads, and paid subscribers who pay $5/month for an ad-free experience. Key indicators that Pandora's model is working include growing numbers of active users, time spent listening, and advertising revenue. Maintaining high customer loyalty through a free basic service and personalized recommendations is also important to the model.

Uploaded by

Aiswarya Mishra
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Caselet 13: Pandora Radio: Fire Unprofitable Customers?

Q1: Map out the key elements of Pandora’s business model. As you apply
theory to your analysis of where this company is today, ask yourself what
are the key indicators that tell Westergren whether his model is working or
not.

Key Elements of Pandora’s Business Model

In the year 2004, Pandora.com was created by the company which ran on the basis of the
subscription model of the company. Later, in 2005, the company had switched to a free model
but still it offered subscriptions in 2005. The strength of the company was that its model worked
on an individual user basis and the music genome project was the core advantage of the
company.

Pandora business model canvas Pandora Media, Inc. is a music discovery platform, offering a
personalized experience for each of its listeners wherever and whenever they want to listen to
music. The company delivers targeted messages to its listeners using a combination of audio,
display and video advertisements.

Key aspects about Pandora’s Business model:

1. Customers: There are primarily two types of customers i.e.


a. Users who stream music for free (free-tier users)
b. Pandora Plus subscribers (paid-tier users). Subscribers receive benefits such as
no ads between songs, fewer skips, and fewer timeouts.
2. Value Creation: For both customer types, company is creating value
a. by providing individuals with a unique personalized music experience
b. promising an easy-to-use interface
c. Affordable product for paid subscribers
3. Value Capture: Pandora uses advertising dollars to pay content consumed by free-tier
users and charges $5 per month to subscribers, which is half the price of most other
music streaming services.

4. Operating Model: One of the most important attributes of Pandora Radio is it’s
technology with its complex algorithms. Other attributes include content right holders
(labels and publishers), artists, and other platforms.

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Caselet 13: Pandora Radio: Fire Unprofitable Customers?

Key Indicators Assessing Westergren Model

The company's initial business model was based on customer subscriptions, and customers
were given free hours to begin with. Later, the company abandoned its subscription model in
favour of a completely free model. Another source of revenue for the company is affiliate fees
earned by referring customers to other online stores such as Amazon and Apply to buy music
online. Although this is a source of revenue for the company, it is not the primary source of
revenue. Advertising is the company's main source of revenue, accounting for approximately
93 percent of total revenue.

Pandora's service quality could be considered excellent. One of the company's core
competencies is communication and additional service. The company updates the songs based
on expert recommendations and also provides links to its listeners if they want to purchase the
music online. The age group of the company's customers ranges from 18 to 34 years,
accounting for approximately 65 percent of total customers, 54 percent of whom are males.
The company's customer loyalty is quite high due to the fact that it provides its customers with
a free ride.

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