Currently, Pandora is most often compared to Spotify, the Swedish-based music service that offers pretty much every- thing Pandora does with some notable differences. For starters, Spotify’s library has 16 times the number of songs availablethrough Pandora. Its tight integration with Facebook makes the social networking aspect of Spotify’s listening experience seamless. And in addition to a Pandora-like custom radio sta- tion generator, Spotify allows users to choose exactly what they want to hear, including single songs, full albums, and playlists of their own making. Spotify has only a fraction of Pandora’s active user base, yet its revenues are more than three times those of Pandora. However, Spotify is losing even more money than Pandora. The digital world is full of failed dreams. Pets.com shipped a lot of 50-pound bags of dog food before realizing that its busi- ness model simply wasn’t cost effective. Myspace signed up over 200 million members before crashing to its current membership of less than 20 million, leading News Corp to sell it for pennies on the dollar after just six short years. And a host of other dot-coms have achieved high levels of Internet traffic and huge stock valu- ations, only to fall because of threats similar to those just noted. Will that be Pandora’s fate? Or will the Internet radio giant ulti- mately declare, “Let the music play?”
Questions for Discussion 1. As completely as possible, sketch the value chain for Pandora from the production of content to the listener. 2. How do horizontal and vertical conflict impact Pandora? 3. How does Pandora add value for customers through its distri- bution functions? 4. Will Pandora be successful in the long term? Why or why not?
Sources: Matthew Bryan Beck, “Pandora Vs. Spotify: Who Will Win the Battle for Streaming Music?, Mashable, February 12, 2012, http:// mashable.com/2012/02/07/pandora-spotify/; Tyler Gray, “Pandora Pulls Back the Curtain on Its Magic Music Machine,” Fast Company, January 21, 2011, www.fastcompany.com; Steven Bertoni, “Spotify Launches An- other Torpedo at Pandora,” Forbes, June 19, 2012, www.forbes.com/ sites/stevenbertoni/2012/06/19/spotify-launches-another-torpedo- at-pandora/; and other information from www.pandora.com/about, accessed August 2012.
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