Pandora fuels music sales

Matt Bowman · February 26, 2010 · Short URL:

Users buying $10 million worth of songs per year directly through the site.

 According to Apple store downloads, your favorite music app is probably Pandora. Ironically, that’s also a darling of the music labels. Apparently the War-that-Napster-Started between consumers and the industry over a decade ago is nearing a truce.

Yesterday, CNET’s Greg Sandoval noted that Pandora’s model is doing more than any-song-on-demand services like Spotify to drive sales:

Russ Crupnick, an analyst with market researcher NPD Group, told a crowd of music and tech executives here Wednesday that free streaming-music sites, which enable people to listen to any song at any time free of charge, lead to a 13 percent decrease in paid downloads. Speaking at the Digital Music Forum East conference, Crupnick sized up the situation this way: "We're eating our young. For some people, more listening just means more listening and tends to lead to less purchasing."

By contrast, online radio services lead to a 41 percent increase in paid downloads, Crupnick said.

I checked in with Pandora founder Tim Westergren to see if he had any data to corroborate the idea that services like his are good for the labels. He said their internal data is almost identical to NPD’s 41% figure, and that the figure makes sense since discovery is the engine for sales.

“We're currently selling about $10 million of music DIRECTLY through the links on our site.” Wesstergren said. “Since we are only 1% of all radio listening in the US, that equates to $1 billion of music sales if all of US radio had the same impact as we.”

“Moreover, our research shows that the music purchased using our direct links is only a third of the total music purchased by our users.”

Pandora was also profitable in Q4, and has managed to avoid the fate of services that let users listen to any song on-demand. SpiralFrog and Ruckus fall into that category and they shut down last year. Imeem sold itself to MySpace for next to nothing.

Pandora was founded in 2000 and has received $56.3 million in venture funding.

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Pandora, the leading internet radio service, gives people music they love
anytime, anywhere, through a wide variety of connected devices: laptop and
desktop computers, smartphones, connected BluRay players, connected TVs,
etc. Personalized stations launch instantly with the input of a single “seed” –
a favorite artist, song or genre. The Music Genome Project®, a deeply
detailed, hand-built musical taxonomy, powers the personalization or
Pandora. Using this musicological “DNA” and constant listener feedback
Pandora crafts personalized stations from the more than 800,000 songs that
have been analyzed since the project began in January 2000.
More than 75 million people throughout the United States listen to
personalized radio stations for free on Pandora through their PCs, mobile
phones and devices such as the iPad, and connected in-house devices
ranging from TVs to set-top boxes to Blu-Ray players. Mobile technology has
been a significant factor in the growth and popularity of Pandora, starting
with the introduction of the Apple app store for the iPhone in the summer of
2008. Pandora instantly became one of the most top downloaded apps and
today, according to Nielsen, is one of the top five most popular apps across
all smartphone platforms.

Pandora is free, simple and, thanks to connectivity, available everywhere
consumers are – at the office, at home, in the car and all points in between.
In 2009 the Company announced that Pandora would be incorporated into
the dashboard in Ford cars via SYNC technology; GM has already followed in
announcing plans to integrate Pandora into its vehicles and Mercedes-Benz
introduced their Media Interface Plus device that works with the
free Pandora iPhone app to provide direct control of Pandora from in-dash
stereo controls. This was all great news for the millions of Pandora listeners
who had been plugging their smartphones into car dashboards to listen to
personalized stations while driving. More than 50 percent of radio listening
happens in the car, making it a crucial arena for Pandora.

Today tens of millions of people have a deeply personal connection with
Pandora based on the delight of personalized radio listening and discovery.
These highly engaged listeners reinforce the value Pandora provides to: 1)
musicians, who have found in Pandora a level playing field on which their
music has a greater chance of being played than ever before; 2) advertisers,
who benefit from the multi-platform reach of Pandora, as well as its best
practices in targeting consumers for specific campaigns; 3) the music
industry, which has found in Pandora a highly effective distribution channel;
and 4) automobile and consumer electronics device manufacturers, who have
noted that incorporating Pandora into their product makes it more valuable
to consumers.

Pandora continues to focus on its business in the United States. The radio
arena has never been hotter, thanks to technology that enables radio to be
personalized to the individual and more accessible than ever before. Right
now millions of people listen to Pandora in the United States and we hope
someday to bring Pandora to billions of people around the world.

• 2000 – Tim Westergren’s Music Genome Project begins.
• 2005 – Pandora launches on the web.
• 2008 – Pandora app becomes one of the most consistently downloaded
apps in the Apple store.
• 2009 – Ford announces Pandora will be incorporated into car
dashboard. Alpine and Pioneer begin selling aftermarket radios that
connect to consumers’ iPhones and puts the control and command of
Pandora into the car dashboard.
• 2010 – Pandora is present on more than 200 connected consumer
electronics devices ranging from smartphones to TVs to set-top boxes
to Blu-ray players and is able to stream visual, audio, and interactive
advertising to computers, smartphones, iPads, and in-home connected

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