So you had better do as you are told

Pandora claims not to be particularly worried about the launch of iTunes Radio

September 5, 2013
September 5, 2013

Apple will add to a long list of online music services next week when it launches iTunes Radio. While many companies would tremble at the thought of Apple planting a flag in their market, Pandora hasn’t flinched, according to its chief technical officer, Tom Conrad.  In a phone interview, Conrad—one of Pandora’s first employees—told Quartz:  “Apple getting into the game doesn’t particularly change the way it feels to come to work here.”

A crowded market is nothing new

Of course, Conrad would be unlikely to admit otherwise. But Pandora has seen off its fair share of competitors since it launched eight years ago into a field then dominated by Launchcast and AOL Radio. Since then it’s faced off against iHeartRadio, Last.fm, Slacker Radio, Google, and Microsoft. In July Pandora attracted 69% of US online radio listeners according to Triton Digital (pdf). The next largest competitor—American terrestrial radio giant Clear Channel—accounted for 13%.

Popularity, however, has yet to turn into money. Pandora has 3 million paying subscribers and says only Google and Facebook have greater mobile revenue than it does. But it has only had two profitable quarters since it began reporting its financial performance ahead of its IPO in June 2011. It has not had a profitable year since at least 2008 (prior data is unavailable). By its own admission (pdf) it is unclear if Pandora’s business model is sustainable without the US government lowering compulsory royalty rates.

Nonetheless, the company last month removed its 40-hour-a-week limit on free listening. In a press release Pandora characterized the restriction as a vestige of time when advertising rates were lower, but it’s hard not to see it as a move to outflank iTunes Radio ahead of its release.

Still trying to innovate

Conrad wants to work on creating a more communal form of listening to music. His vision—though it has yet to become an official Pandora project—is for a room full of people to be able to vote up or vote down songs on a shared station.

Pandora wouldn’t be the first to try this. Turntable.fm is a service based entirely on it. But Turntable never managed to build a big base of users (in fact, after a promising start, it crashed.) By contrast, the Pandora iOS app is the second most downloaded free app ever on iTunes. Its Android app has been installed on more than 100 million devices.

So whereas Turntable, even in its heyday, was used mostly in online chat rooms, Pandora hopes to bring the service to the living room. The app is so widespread that everyone at a party could conceivably have it on their phones already. A group-listening service would allow the party guests to give the thumbs-up or thumbs-down to a song that’s playing, and Pandora would respond by honing the soundtrack to satisfy the tastes of all in attendance. Conrad envisions “an environment that is personalized to a group that is really simple and really seamless.”

How will this make money, though? We don’t yet know. During its most recent earnings results conference call (paywall), Pandora CEO Joe Kennedy said his company is still focusing on product innovation and revenue growth rather than profitability. Kennedy also noted during the call that he was projecting profits to come in 2014.

Creating tangible value for artists

The company has also been working on a suite of tools for musicians and labels to analyze Pandora’s trove of listening data. Conrad says hundreds of artists come through Pandora’s offices every year to get previews of software it’s still working on. The tools will allow artists and record-label executives to time album releases better, select the right single to promote, and even pick out a good opening act or research who else their fans are listening to. However, Pandora has not set a release date for the product.

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