THE REAL PANDORA STORY. Liz\Internet & Satellite Radio\Pandora\Radio and Pandora R LA
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1 THE REAL PANDORA STORY
2 WHAT IS Pandora is a somewhat personalized internet playlist of songs. Users enter a favorite artist, track, comedian or genre, and Pandora will create a personalized station that plays their music and more like it. Users can rate songs by giving a thumbs-up or thumbs-down feedback which are taken into account when Pandora selects future songs, giving users more personalized results. Pandora has no personalities, local news, weather or traffic, community projects or personalityhosted events. It is available only with an Internet connection in the United States, Australia, and New Zealand. The service has two subscription plans: a free subscription supported by advertisements, and a feebased subscription without ads. Pandora One subscription is $4.99/month for unlimited ad-free listening, higher quality audio, desktop application, and fewer interruptions. Apps are available on ios, Android, Windows Phone, and Blackberry. The 40-hour per month limit on free mobile listening was lifted September Library size is 1 million compared to iheartradio s 15 million, Spotify s 20 million, itunes Radio s 27 million, and Slacker s 13 million. At the end of third quarter 2015, Pandora had 78.1 million active listeners, compared to 76.5 million for the same period of the prior year with total listening hours (TLH) of 5.14 billion, up from 4.99 billion for the same period last year. (Pandora Q3 2015, Financial Results)
3 PANDORA A GOOD CONSUMER PRODUCT, BUT NOT A VIABLE AD VEHICLE The problems with Pandora from an advertiser s perspective: No local focus or connections, no personalities, nothing that invites local participation Commercials aren t expected to be there that s why product satisfaction is waning Individual, not simultaneous delivery making it impossible to create and control workable reach and frequency on Pandora Lack of prompting - Ads are served up but there is no verification that there is listening Registration process - They can t verify who their listeners are No knowledge of listener Location - They only know that they are listening in the market
4 PANDORA DOESN T KNOW THEIR LISTENERS Registered users are those who have created an account, providing their age, gender, zip code, and address. Blue Inc. says that in 2011, 88% of people who registered on the internet provided either false or incomplete information siting privacy issues. According to a Consumer Reports June 2012 survey, one out of four Facebook users also falsify or avoid giving their personal information due to privacy issues. If the registration process is flawed, the accuracy of the data being provided to Advertisers is questionable. Arbitron Meter holders are verified by age, gender, ethnicity and address.
5 % Highly Satisfied PANDORA SATISFACTION ERODES OVER TIME December 2009 vs. June % 80.0% 75.0% 70.0% 60.0% 60.0% 45.0% 40.0% 35.0% 20.0% 0.0% 6 months or less 6-12 months 1-2 years 2-3 years 3+ years Dec-09 Highly Satisfied 88.0% 83.0% 72.0% 58.0% 48.0% Mar-10 Highly Satisfied 85.0% 84.0% 70.0% 52.0% 43.0% Mar-12 Highly Satisfied 79.0% 74.0% 61.0% 44.0% 34.0% Nov-12 Highly Satisfied 77.0% 74.0% 58.0% 40.0% 32.0% Jun-14 Highly Satisfied 75.0% 70.0% 60.0% 45.0% 35.0% Source: Bridge Ratings LLC. Sample 4,000 Pandora Primes, as reported in Inside Radio, September 5, 2014.
6 PANDORA SESSION USE COLLAPSES OVER TIME Over time, Pandora consumers spend less time listening and reduce number of daily sessions months 4-7 months 8-12 months monhts months 25+ months Time Spent Per Session Sessions Per Day Source: Bridge Ratings LLC. Sample 4,000 Pandora Primes, as reported in Inside Radio, September 5, 2014.
7 % Hearing commercials during typical listening session THE ADVERTISING VALUE PROPOSITION DIFFERENCE BETWEEN RADIO AND PANDORA Commercial Advertisement Awareness Trends Pandora Users vs. Broadcast Radio Users Over Time 100.0% 80.0% 91.0% 88.0% 90.0% 91.0% 93.0% 60.0% 40.0% 49.0% 45.0% 20.0% 28.0% 23.0% 20.0% 0.0% 0-3 months 4-6 months 7-12 months months months Broadcast Radio Users Pandora Users Awareness of commercial advertising is compared in both traditional broadcast and Pandora/pure play Internet radio environments. This study asked different subsets of listeners of each if they a) heard an audio commercial during listening sessions and b) if they could recall any of those commercial messages. Source: Bridge Ratings, study conducted between January 3, 2014 June 6, 2014, released July 25, Sample 4,339 Pandora Primes ages 12+, 4,400 Broadcast Radio Primes ages 12+, and 32,004 Persons who have used Pandora 1+ years.
8 PANDORA AD LOAD NEGATIVELY IMPACTING LISTENER SATISFACTION What will Pandora usage look like in 1-2 years as pace of new user growth inevitably slows and listener fatigue impacts time spent listening. In order to overcome the cost of Pandora s per song royalty rates, Pandora must increase the number of advertisements per hour. Considering commercial interruptions are the number one reason for dissatisfaction, listener retention and listening time per user will inevitably suffer. Current ad load is already hurting satisfaction for long-term users and the ad load will need to rise significantly, as car-based listening grows and royalty rates rise. Source: BTIG Research, Pandora Ad Load Negatively Impacting Listener Satisfaction and Ad Load Must Increase Notably, by Richard Greenfield, April 2012.
9 PANDORA S MAJOR DRAWBACK Pandora Users Express Growing frustration over annoying commercials, limitations on skipping songs, and no information, according to the latest 2014 TechSurvey10. Source: Jacobs Media, Techsurvey10, April 2014.
10 LISTENERS TUNE IN TO AM/FM RADIO TO HEAR THEIR DJS/SHOWS/HOSTS Source: Jacobs Media TechSurvey 8; Based on 170 stations 12 radio formats 57,358 radio listeners.
11 ONLY 30.0% OF ADULTS 18+ HAVE VISITED PANDORA IN THE PAST MONTH. 100% 91.7% 92.8% 93.0% 93.4% 93.9% 94.3% 93.9% 94.1% 80% 60% 40% 30.0% 52.4% 49.1% 42.0% 35.8% 30.0% 25.3% 37.2% 20% 0% Adults 18+ Adults Adults Adults Adults Adults Adults Women Listened to Radio Past Week (M-Su, 6a-mid) Visited Pandora Past Month Source: Scarborough, R (August 2014 July 2015), Los Angeles DMA.
12 ONLINE MUSIC SERVICES CUME TO ONLY 28.7% (MONTHLY). AM/FM STREAMS CUME TO 17.4% (MONTHLY). OVER THE AIR CUMES TO 92.8% WEEKLY. Ways used internet/apps on any device past MONTH 92.8% Using Online Music Services can only cume to 24.7% of all consumers in the Los Angeles Metro a MONTH 27.1% 17.4% 28.7% Listened to Radio Past WEEK (M-Su, 6a-mid) Listened to radio online (local or Internet) past MONTH - includes local AM/FM stations, iheart Radio, Radio.com, etc. Listened to local radio station online past MONTH Listened to online music service past MONTH - includes Pandora, Spotify, Last.fm, etc. Source: Scarborough, R2 2015, (August 2014 July 2015), Los Angeles Metro, Adults 18+.
13 CONSUMERS ARE LISTENING TO THEIR AM/FM STATION ONLINE 9,445,857 Ways used internet/apps on any device past MONTH 2,760,293 Adults 18+ listened to radio online (includes local AM/FM stations, iheart Radio, Radio.com, etc.) 1,773,022 listened to their local AM/FM station online 2,922,634listened to online music service (includes Pandora, Spotify, Last.fm, etc.) 2,760,293 1,773,022 2,922,634 Listened to AM FM Radio past WEEK (Mon-Sun, 6a-mid) Listened to radio online (local or Internet) past MONTH Listened to local radio station online past MONTH Listened to online music service past MONTH Source: Scarborough, R2 2015, (August 2014 July 2015), Los Angeles Metro, Adults 18+.
14 PANDORA VISITORS LISTEN TO RADIO EVERY WEEK 95.1% 95.8% 95.5% 95.8% 95.0% 94.8% 96.9% P18+ P18-34 P18-49 P25-54 P35-64 W25-54 M25-54 Source: Scarborough, R (August 2014 July 2015), Los Angeles Metro, Adults who visited Pandora past month.
15 AM/FM RADIO IS THE TOP SOURCE FOR KEEPING UP-TO-DATE WITH MUSIC % Who Ever Use Each Source to Keep Up-to-Date With New Music AM/FM Radio Friends/Family YouTube Pandora Facebook Music Television Information/Displays at Apple itunes SiriusXM Satellite Radio iheart Radio Music Blogs Spotify 20.0% 18.0% 14.0% 14.0% 48.0% 39.0% 33.0% 30.0% 30.0% 75.0% 66.0% 59.0% Source: Edison Research/Triton Digital, Infinite Dial Base: Those saying it is Very Important or Somewhat Important to Keep Up-To-Date With New Music (47% of Total 12+ Population)
16 PANDORA DOES NOT REPLACE RADIO Despite the rapid growth of Pandora, Pandora s gains are not coming at the expense of AM/FM radio. In fact, Pandora listeners report spending 50% more time listening to AM/FM radio than non-pandora listeners. Pandora and radio can coexist. Pandora delivers music fans a unique music experience. We also see that Pandora listeners value AM and FM radio for a personal connection that Pandora doesn t deliver. Source: Vision Critical Study of 1,017 adult Americans in November 2012.
17 RESOURCE REFERENCE Bonneville International Bridge Ratings CBS Radio Jacobs Media Katz Radio Group
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