
Pandora Files To Go Public - pitdesi
http://techcrunch.com/2011/02/11/pandora-files-to-go-public/
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johnwatson11218
I think Pandora is a good company to buy because they have superior
technology. I pay the $30 or so for the annual subscription to get unlimited
listening and no ads. I have tried other services like this but I always come
back to Pandora. I have read several articles that talk about the techniques
they use to define a "station" and I think it is pretty solid.

It is my understanding that they have hired musicians to listen to each of the
songs they stream then rate each one according to dozens of factors. The
factors include things like "acoustic guitar", "strong melody", "high studio
production values", "gritty vocals", etc etc. Then they are able to do some
kind of cluster analysis on that dataset. So that if you put in "Stone Roses"
you hear music from that band but then others that have a similar sound.

I find about 2 or 3 new bands that I really like every week. I have actually
started buying CDs again.

~~~
sp332
They actually train their people in music theory, because they pull the music
apart and list a few hundred features. Depending on the genre, there are
different lists of musical features that might differentiate the songs.

This is what makes Pandora unique from Last.fm, or Ping, or other "social"
music discovery sites. Instead of recommending songs according who likes them,
it learns what kind of music you like. It looks across genres and artists to
the actual musical features of each song.

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skybrian
I don't know whether this has changed, but years ago when I worked there, the
music analyst jobs required that you already know some music theory. (The
training is to learn their system.) It's a good day job for musicians.

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davidu
This company is almost entirely investor owned. Geez.

It's been saved from the brink of death so many times, the actual employees
and founders really aren't going to get a tremendous windfall for their
efforts.

~~~
robryan
At least they will get something which is better than if they didn't let
investors save it. A quick look seemed to reveal they had pretty high salaries
though so it's not all bad.

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troymc
I can't get Pandora in Canada (unless I use a proxy), so I don't really know
how it works. I was struck when I read:

"About 86 percent of Pandora’s revenues ($78 million) comes from advertising,
the rest ($12 million) comes from subscriptions."

which made me think, wow, Pandora is kind of like a newspaper, magazine, or
cable TV network!

~~~
longarm
Pandora commands higher than average ad rates. Remnant (which is bargin
basement inventory) is somewhere around $5cpm and I don't think they sell to
networks for display to keep demand high. It's actually hard to get inventory
there unless you are a premium buyer. For those of you who don't know or care
much about online ads, all this basically means is that almost every other
publisher (Huffpost, whatever) would kill to Pandora's rates. The fact that
they aren't incredibly profitable shows how tough the business is. God knows
how Grooveshark makes any money.

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zacharycohn
I don't know much about the market/strategy behind IPOs. Is it a good idea to
IPO if you just lost ~$325k?

I assume they have intelligent reasons behind the IPO - can someone explain
the rationale?

~~~
adamt
The article states they lost $328k on revenues of $90M for the first 9 months
of the year. The $328k loss is not really material (either as a proportion of
revenue, or absolutely versus the size of the business) they are essentially
breaking even. If you look at the numbers (image in the article) The $328k
loss also includes some exceptional charges, they made an operating profit of
$1.15M in the period.

Their revenues in the same 9 months of last year were $31m, so they have
tripled their revenues year on year. Over the same period their costs less
than doubled.

If one were to extrapolate this growth rate forward by just one year (a bit
crude, but makes a point), they'd end up with $270m revenue, on $170m costs so
$100m profit.

They are now breaking even - which is a simple metric of a sane
business/proven model, doing significant revenue and growing very quickly. So
now they are in an attractive state for the markets.

In terms of strategy, Techcrunch shows their first VC round was back in 2000,
with significant further rounds in 2004 and 2005. One could safely assuming
the overriding factor is that VCs will be looking for an exit.

An IPO will also provide the company with significant injection of operating
cash, along with liquid paper (stock) with which they can use in further
acquisitions

~~~
rradu
Still seems weird seeing a company that's not even profitable yet go public. I
don't expect the initial demand for their stock will be that high, despite the
growth.

~~~
jonknee
Plenty of companies go public before becoming profitable, it's a way to raise
capital. Tesla Motors comes to mind for a recent example. Same for Clear.

~~~
rradu
Tesla was nowhere near profitability when they went public. Pandora just has
to wait a few more quarters before getting access to a natural flow of cash.
That's what I found strange.

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adamt
Their VCs from 2000, 04 and 05 will all be hungry for an exit.

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Sniffnoy
Oh, I read "files" as a noun there, as in they were going to let people see
inside their database of music-quantification. Was very disappointed on
learning what it actually meant...

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martythemaniak
You know something's screwed up when you can buy a company's stock, but not
their product. Canadian music and copyright laws are terrible.

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jdavid
I think Pandora will go back into heavy losses if they raise money. I love
Pandora as a service, but it's a far cry from being a Netflix. ( a long time
paying customer of both )

Pandora's revenue is threatened by so much, RIAA contracts, pirating,
advertisings race to zero ( via google ), etc...

They know this, and they will need to reinvent themselves to be worth
anything. As a result I predict they will blow the 100 million on radically
new business methods. Considering the success rate of music companies... I am
worried.

~~~
aaronblohowiak
I hope they spend it on advertising. Their product rocks, i think they just
need wider exposure. They also claim exclusive providence to being able to
authentically post jobs in the bay area looking for "rock stars" to help out
their company ;)

~~~
longarm
That would be a pretty bad sign. I sure as hell wouldn't invest in a company
that's going to turn around and spend the money they raise on ads. They should
be building a war chest and their biz dev and legal teams to get some leverage
on the labels. Regular radio pays $0 of their revenue to labels, Pandora pays
$.50 of every $1.

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aaronblohowiak
Radio stations pay annual fees for the license of broadcasting music, which is
why stations have to report every song they play (this data is sampled to
divvy up royalty payments to labels and artists.)

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brikmaster
It allows their investors to sell stock and get their money out.

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longarm
I wonder if they pay lower royalties on live music and that's why they try to
jam it into my playlists all the time. In the last year or so I've felt there
like there was something just a little off about it some of the song choices
and I'd be curious to know if different artists/labels/genres command
different rates and if that impacts the song choice.

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deffibaugh
The number one reason I love Pandora is that it offers an ad free paid version
with higher quality. Its dead simple and does exactly what you want it to
without tacked on social networking.

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leon_
If you're not from the US and want to use pandora, I've got some scripts
bundled together to get it running over TOR (it's not as slow as it sounds
because only the control interface is using TOR and the stream goes through
your 'normal' internet connection):

<https://github.com/jsz/PanTORa>

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pitdesi
And the IPO frenzy starts heating up... like it's '97

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davidu
Not really.

Go find a company from '97 that had $70 million in revenue and was breaking
even.*

If there is a company, it might have had absurdly inflated ad-based revenue
when CPMs were like $30.

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pitdesi
ok, maybe more like 95... Netscape had $80mil in revenues and was close to
break even (made a profit in '96) <http://www.secinfo.com/dRqWm.8Ae8.htm#49o5>

~~~
davidu
Netscape absolutely deserved to go public based on any metric. The future
could not be predicted based on their inaction and Microsoft's dominance.

