PANDORAFreemium Business Model

Launched by Will Glaser and Tim Westergren in 2005

It’s the most successful subscription radio service.

In January 2011 it had over 80 million registered users in USA and increasing by one new subscriber about every second.

It had over 50% of all internet radio listening hours.

Creates customized channels or playlists based on the users preferences such as his favored artist or genera.

Professionals musicians listen to new songs every day and classify them into categories based on several criteria , there categories will be used to generate those channels (playlists).

Challenges :

Pandora.com founders had to deal with the fact that other internet radio stations were providing free music but without ads, moreover iTunes launched in 2001and by 2005 it had become very popular and was charging 99 cent a song with 20 m users .. So the odds were against it

It’s first business model was to give away 10 hours of free access to Pandora , and then ask subscribers to pay 36$ a month for a year after they used up there free 10 hours.

1000.000 people listened to their 10 hours for free, but they refused to pay for their annual service… people loved Pandora but were unwilling to pay for it, or so it seemed in the early years.

Then it facing financial collapsed .. Pandora introduced ad-supporter option, subscribers could listen to a maximum 40 hours per month for free.. After that subscribers had choices : subscribe for the rest of the month for 99 cent or become a premium member

and if not , the music would stop but he can sign up again next time

This model turned out to be a success and in a few weeks they had sufficient funds to pay their infrastructure

In 2006 Pandora added a “ buy “ button that direct listeners to amazon or iTunes to buy songs they listening to.

In 2008 they added iPhone app which attracted 35.000 everyday.

In 2010 they had 600.000 premium users which is .01 of the total 60 million users.

In 2011 the value of its shares was $2.6 billion.

Revenues mostly from ads , subscriptions and affiliate fee from Amazon and iTunes.

Freemium model

Free & premium

The model is based on giving away some services for free to 99% of the customers , and relying on the other 1% of the customers to pay for premium versions of the same services.

The marginal cost is closed to zero, and that’s why the freemium model is feasible.

Thanks 4 listening

Osaid Tomeh