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Can Pandora Succeed With Freemium?

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Syahir Ghariff

on 23 December 2015

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Transcript of Can Pandora Succeed With Freemium?

Can Pandora Succeed With Freemium?
Analyze Pandora using the
value chain and competitive forces model.

What competitive forces does the company have to deal with?

What is its customer value propositions?
Customized music
User Experience
No commercials
Music selection
Easy Access
Pandora provides search on basis of song title, artist name or genre. It scan through the entire music database and play music searched criteria for customer.

Thus, it create personalized radio station
Easy to use and user can skip a song if he or she wants
Provide monthly subscription which is free with commercials and has less advertisements compare to FM/AM radio
traditional competitors
new market entrants
substitute products and services
Pandora provide services almost every platform.

Pandora offers competitive pricing for its advertisers and customers
New start up enters online music industry without many difficulties

Although, the threat is quite substantial
traditional land based radio
satellite radios
internet music providers
Customers select a particular genre of music they prefer. Pandora provide with the best content

Pandora must pay for all its customer's playlists as a result it is disadvantage to have to pay all the suppliers
Increasing competition from Apple, Spotify, Youtube
Pandora has to compete with other content providers, and advertising customers
Pandora pays royalty at par with downloadable music.
Converting to a premium subscription account is still a problem
Although users have the option for ads based free, but customers do not tolerate heavy ad loads.
Pandora provide algorithmic ability to predict the music their customer want, and unlimited music content.

Music Genome Project
classify related music with different artist.
Explain how Pandora's "freemium" business model works.

How does the company generate revenue ?
In the beginning Pandora tried to get music subscribers by giving people 10 free hours, then asking them to pay $36 a month after that for the service. Of course no-one was willing to pay so much for a service that they could get for free by switching on an FM radio

With a freemium service the basic service is available for everyone for free, but with strict limitations in bandwidth and ads between songs which results in a lower quality listening experience

Pandora One : a premium service that offered no advertisements, higher quality streaming music. The service cost $4.99 per month.

In fiscal 2013 Pandora total's revenue was $427.1 million of which 88 percent of it came from advertising.
Simply enter a favorite artist, track, comedian or genre, and Pandora will create a personalized station that plays their music and more like it.

Rate songs by giving thumbs-up and thumbs-down feedback and add variety to further refine your stations, discover new music .
Can Pandora succeed with its "freemium" model ? Why or why not ?
Yes. Pandora can succeed because freemium is an efficient way of a amassing a large group of potential customers and companies.

A freemium model works best when business incurs very low marginal cost, approaching zero for each free user of its service, when a business can be supported by percentage of customer that willing to pay.

There are also other revenues like advertising fees that can make up for shortfalls in subscriber revenues.
Ahmad Syahir bin Abdul Ghariff, 1415779 SECTION 5
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