PANDORA A PYRAMID SCHEME!

[SirRoxalot]

Better yet, as a buyer, how would you buy time on Pandora? Can you buy every user in a particular demo in a particular market? How are the ads inserted? What's the tune-out factor? Is Pandora active listening, or passive listening? Do you buy a schedule? If so, how are the ads scheduled on those millions of individual streams?

Lots of questions, and we still can't get an answer on how close they are to profitability.

 

[joshzz]

Secondchoice, I believe Pandora maybe the next great short. maybe. josh

 

[davideduardo]

Better yet, as a buyer, how would you buy time on Pandora?

just as every stream is or can be customized, so can ad insertion. Ads can target by age, gender, geography, even average income of the registered ZIP code. You can buy broad or by any of a number of stratification variables.

Can you buy every user in a particular demo in a particular market?

Yes

How are the ads inserted?

The same way the songs are... or the same way web banners and ads are inserted in content.

What's the tune-out factor?

Incident length is longer than terrestrial radio, TSL is about the same as music stations on terrestrial.

Is Pandora active listening, or passive listening?

Advertisers don't buy "listening." They buy "exposure." The PPM has no TSL figure... it has Average Time Exposed (ATE).

Do you buy a schedule? If so, how are the ads scheduled on those millions of individual streams?

It's really simple... on the non-premium streams (pay, and no ads) the playlist is generated by computer from your input, and the ads are inserted just like the songs... but just a couple of minutes an hour max, not 15 minutes or so.

Lots of questions, and we still can't get an answer on how close they are to profitability.

They are getting close to profitability, which has, for a long time, been predicted for 2012. For a good pre-IPO writeup, you can see the WSJ digital article here:

http://allthingsd.com/20110526/pandora-pre-ipo-numbers-getting-bigger-and-bigger/

 

[SirRoxalot]

The WSJ article is very interesting, but it leaves out some major issues that Pandora will have to face. The first hurdle is the cost of delivering its service. As more users come on board, they'll need more bandwidth. Internet service providers are being facing with massive expansion of their infrastructure to deliver an every increasing number of data-intensive services, particularly in the video sector. Getting data from the servers to the Internet is going to get more expensive as demand outstrips supply. Somebody will have to pay for all that infrastructure.

On the receiving end, Pandora's fastest growing segment is on smart phones. What's happening at cellular providers? They're rolling out data caps at the same time as speeds and connectivity are improving. Consumers are going to have to decide whether they want to eat into that cap with music streaming, or dump a single download into their phone's MP3 player and add it to the shuffle list. The ISPs are all pushing The Cloud. Why? Because that will be more revenue for them. That's another reason that cellular companies are vehemently opposed to activating the FM chips in most phones. When consumers have to make the choice between video-chatting and streaming music, I'm betting that built-in MP3 players will beat streaming.

There's a reason that this IPO is coming out now. Most of these issues are still clouds on the horizon. The storm is gathering. They want to get their investment money back before it rains.

 

[TheBigA]

Incident length is longer than terrestrial radio, TSL is about the same as music stations on terrestrial.

Not exactly. In fact average TSL for a week on Pandora is equal to a day in OTA.

And unless you're comparing streams of OTA with Pandora, I'd question your methodology.

 

[TheBigA]

More about who owns what in the IPO from RBR:

http://www.rbr.com/radio/a-look-at-who-is-selling-pandora-shares.html

 

[davideduardo]

Incident length is longer than terrestrial radio, TSL is about the same as music stations on terrestrial.

Not exactly. In fact average TSL for a week on Pandora is equal to a day in OTA.

And unless you're comparing streams of OTA with Pandora, I'd question your methodology.

I'm comparing streams of terrestrial music stations with those of Pandora.

Pandora or terrestrial music streams get around an hour weekly TSL, while the OTA signals are around 3 hours to 3:30 in AWTE.

The differences between terrestrial AWTE and stream TSL is comparable to the OTA and satellite ratios. The cause is not product, but in the case of Sirius / XM the fact that only about a third of listening time is in the car, and nearly all satellite usage is car only. With streams, despite the growth of smart phones, they are still a supplement to other delivery forms and streams, in general, are not yet as accessable. As smart phones become more prevalent, and able to plug into the car, the home devices, the workplace dock, etc., single purpose "radios" will become obsolete. We already know that the consumer wants a single device that gives voice and text and video communication, plus audio, video, gaming, photography and pimple removal.

 

[TheBigA]

As smart phones become more prevalent, and able to plug into the car, the home devices, the workplace dock, etc., single purpose "radios" will become obsolete.

I think that's already happened if you compare sales figures of single purpose radios to smart phones. The difference is for long term usage, smart phones are impractical for music listening (long commutes, long road trps, etc) because of battery life and tramission costs. OTA radio is simply an easier cheaper transmission device for receiving this kind of content. And telecom companies are moving away from "unlimited" service plans.

As for "all-in-ones," everyone knows the value of that. That's why the NAB is trying to get OTA included. Unfortunately, radio companies aren't co-owned by electronics manufacturers any more, and the manufacturers are opposed to including OTA in smart phone. So major companies have invested in apps and various online systems.

 

[GeneSavage]

This is an absolutely BIZARRE, surrealistic thread.

David states hard numbers from independent sources on Pandora listeners (which indicate listening locations, BTW... and they're NOT "in the next room"), and we're told it's "smoke and mirrors."

David gives anecdotal evidence about people everywhere talking about Pandora and NOT radio, and it's dismissed. He says listeners consider Pandora radio, and radio people say (in effect) "who cares about listeners? What WE think is all that matters!"

...Boy, when internet radio kicks broadcast radio's tail all up and down the dial I will remember this thread and LAUGH.

The (broadcast) emperor has no clothes!

 

[joshzz]

I read this: "How does one value an Internet-based company that’s losing money? If and when Pandora turns cash flow positive it is always going to have much smaller margins than a successful broadcasting company. SoundExchange and RIAA will see to that."

SOundExchange,RIAA, and change of tastes by listeners will result in Padora's demise.

People should listen to owner of WBEB, Jerry Lee.

 

[GeneSavage]

Yes, Pandora has to pay royalty fees. How much do you pay for tower maintenance? Transmitter electricity? Music research?

Pandora may not make it; personally, they drive me a little batty after not very long. But that doesn't mean internet radio is a bad bet, and I wouldn't count Pandora out just yet, just as they're riding higher than they ever have!

However audience tastes may change, Pandora can change with them. When each listener can build their own radio station to their liking, it's hard to get it wrong! Are you going to tell me radio hasn't changed with the changing tastes of consumers, from comedies & dramas to rock and roll to EZ listening to album rock to alternative to dance to hip hop to...?

Today, radio gets places Pandora doesn't. However, Pandora gets places YOUR station doesn't.... and if you're already paying for mobile internet access (for email, facebook, twitter, etc), why NOT listen to Pandora instead of whatever stations you can pick up?

My biggest complaint with some of the posters is their determination to argue black is white, up is down, hot is cold, etc. "Pandora's audience is growing." "No it isn't!" "Pandora is nearing profitability." "No they're not!" "Pandora is gaining advertisers." "Nuh-uh!" "Pandora can give listener numbers more accurate than PPM." "No they can't!"

Live whatever fantasy you like; but you'll do better if you're honest with yourself about your competition.... You CAN beat them, but you have to THINK about how to do that. All I hear are people sticking their heads in the sand and refusing to accept Pandora (and internet radio) is taking away some of the ears that have before always been handed to them.

 

[TheBigA]

All I hear are people sticking their heads in the sand and refusing to accept Pandora (and internet radio) is taking away some of the ears that have before always been handed to them.

Then you're not listening carefully. CBS just launched its own Pandora. Clear Channel will have one shortly. All the major companies will be competing in that same sandbox, and ultimately it will come down to money. Pandora has no alternative income source, other than stockholders. CBS and CC do, which means they have deeper pockets. Once Pandora is playing the quarterly profits for Wall Street game, they'll have no choice but to keep on raising fees and increasing advertising. Soon, consumers will feel they get a better deal from Clear Channel. Lots of people blamed going public as the undoing of a lot of radio companies. It will do the exact same thing to Pandora and Facebook.

 

[davideduardo]

People should listen to owner of WBEB, Jerry Lee.

Reread the Jerry Lee comments. Jerry is saying that streaming of radio stations, due to the impossibility in larger markets to qualify as a simulcast, may detract from the ratings of the core radio station.

CBS and Pandora and Clear are establishing new business models, not appendages to radio stations. Clear and CBS also stream their own stations.

Time will determine what the best strategy is. For the moment, pureplays are gaining on station streams.

And radio should work with the ad agencies to convince AFTRA that its streaming policies will diminish the value of their members' work, and a mutually beneficial resolution would also allow streams to be additive to station ratings in the local market.

 

[davideduardo]

CBS just launched its own Pandora. Clear Channel will have one shortly. All the major companies will be competing in that same sandbox, and ultimately it will come down to money. Pandora has no alternative income source, other than stockholders. CBS and CC do, which means they have deeper pockets.

But all of them will ultimately depend on the same business model... a very light commercial load or a small payment. The winners will be determined based on the quality of the algorithms, the interface and the selection. All will pay the same digital royalties and performance fees.

The real question is how big the market is... and can it be expanded by adding "programmable" content such as jocks, information, weather and such.

 

[TheBigA]

All will pay the same digital royalties and performance fees.

Not exactly the same. These companies have all negotiated various discounts in the royalties from the official CRB rate. Pandora claims they have the best rate, and one that saved them from bankruptcy.

And as I pointed out, only the broadcasters can combine the various platforms on one player that allow users to switch among various forms of entertainment, from a Pandora-like playlist, to a more traditional OTA radio station with DJs and information.

 

[TheBigA]

I tracked today's IPO in real time, and it seems most people did what I suggested, which was buy early and sell quickly. If you sold within the first hour, you made $10 a share, because it peaked at $26. But then it fell pretty quickly back to $18.

RadioInk wrote an interesting analysis of it today, and I agree with every word. The main issue for investors is making money, and so far, Pandora isn't. Having 70 million users is unimportant if they use the service for free. Unless management can follow up today's IPO with a bunch of new products that will be tied into revenue, Pandora won't be a growth stock or a growth company.

 

[goodhelp]

I haven't missed the point about venture capitalists at all. I understand their role. I also understand that they're very adept at manipulation of both companies and markets.

Absolutely! How long has this been public knowledge? At least since March 2009! Check it out:

http://zerohedge.blogspot.com/2009/06/goldman-sachs-engineering-every-major.html

 

[TVradioguru]

RadioInk wrote an interesting analysis of it today, and I agree with every word. The main issue for investors is making money, and so far, Pandora isn't. Having 70 million users is unimportant if they use the service for free. Unless management can follow up today's IPO with a bunch of new products that will be tied into revenue, Pandora won't be a growth stock or a growth company.

Not sure if I agree with every word, but the Pandora IPO brings back past echos from XM Radio. Similar claims were made as to the massive growth and subscriber level, much of that driven from XM being standard equipment in many new domestic car radios. Ultimately did any of that help XM over time? I think we know the answer.

What I find contrary to what Pandora claims and is somehow unique to them, is the amount to royalties to Sound Exchange. The larger Pandora expands, the more lopsided their balance sheet appears to become with royalty charges. It doesn't look like such a great deal to me.

Once Wall St. bothers to look, expect Pandora to fall amongst the penny stock wreckage of past not-profitable business models.

 

[davideduardo]

All will pay the same digital royalties and performance fees.

Not exactly the same. These companies have all negotiated various discounts in the royalties from the official CRB rate. Pandora claims they have the best rate, and one that saved them from bankruptcy.

But any larger operator with clout... such as Clear or CBS... is going to go for the same deal. Thus, the same rates. Eventually, they will negotiate just like radio does with ASCAP and BMI, and create new economies.

And, just as talk radio got a different rate card from those entities, pureplay companies that allow the mixing of non-musical elements with music will try to get lower rates for that kind of stream... allowing them to hire talent away from radio or in addition to radio, making pureplays even more attractive.

 

[JustPastBuffalo]

All will pay the same digital royalties and performance fees.

Not exactly the same. These companies have all negotiated various discounts in the royalties from the official CRB rate. Pandora claims they have the best rate, and one that saved them from bankruptcy.

But any larger operator with clout... such as Clear or CBS... is going to go for the same deal. Thus, the same rates. Eventually, they will negotiate just like radio does with ASCAP and BMI, and create new economies.

And, just as talk radio got a different rate card from those entities, pureplay companies that allow the mixing of non-musical elements with music will try to get lower rates for that kind of stream... allowing them to hire talent away from radio or in addition to radio, making pureplays even more attractive.

So here it is, June 22, last previous post in the thread dated June 17th. I've watched this thread, refrained from comment and checked "P's" share price each day. Looks busted. Trading as I write @ $13.21. As a friend of mine is fond of saying, "it's the casino, you can play, but know the rules... and if you don't know who the mark is, you're the mark."