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Deal Radar 2008: Pandora

Posted on Wednesday, Aug 6th 2008

Pandora Media, based in Oakland, California, is an Internet radio web site. Founded by Tim Westergren in 2000, it was formerly known as Savage Beast Technologies. Pandora uses the Music Genome Project, a collection of songs that have been analyzed by trained musicians. These musicians, who typically have a four-year degree in music theory, evaluate all aspects of a song, including melody, harmony, instrumentation, rhythm, vocals, and lyrics. According to Westegren, there are about 400 attributes to describe a song, and the Music Genome Project breaks each song down to its most elemental parts, or its ‘DNA’.

The result is a site that is entirely focused on music and can tell listeners if they will like a song even if they have not heard it before. When the user enters the name of a song or artist, the database plays selections—from popular to lesser-known songs—with similar musical attributes. Users can provide their feedback, which is taken into account for future selections. While listening to the song, users also have the option of buying it or the album it is a part of from Amazonmp3.com, Amazon.com (for CDs), or the iTunes Store.

The Pandora media player can be played through a browser, Sonos products or any slim device. In late 2007, Pandora announced that it can be accessed from select wireless phones from AT&T. The deal would allow AT&T customers to listen to their favorite artists and create personalized radio stations on their handsets. In July 2008, Pandora announced its accessibility on the iPhone, iPhone 3G and iPod touch through the iTunes App Store.

The company has raised more than $22 million so far from venture capital. It raised $1.5 million in seed funding from Garage Technology Ventures; $7.8 million in Series B funding from Labrador Ventures, Selby Venture Partners, WaldenVC, Peter Gotcher, and Robert Kavner; $12 million in Series C funding from Crosslink Capital, Labrador Ventures, Selby Venture Partners, WaldenVC ; and an undisclosed amount in Series D funding from Hearst Corporation, JP Morgan and Piper Jaffray.

Royalties, however, have proved a Pandora’s box of troubles. In July 2007, the company blocked access to countries outside the US (except the UK) because of the steep increase in fees by the US Copyright Royalty Board. The company then ran into issues with two main UK collection agencies over royalties. Though Pandora has tried to work with copyright holders from the beginning, it has yet to become profitable and so could not pay the high royalty bills that the two companies were demanding. The company had no option but to shut off access from the UK as well on 15 January 2008. Further, MSN Radio abruptly stopped Pandora in June 2008 after two years of launching the service.

According to Quantcast, the site has over 1.6 million US monthly visitors. According to PC Magazine, Pandora expects to generate $25 million in revenue this year but will end up paying $18 million in royalties. The company was hoping to be cash positive under the old royalty rates, but the new rates have made things bleak.

The company is eager to market its brand, and it has immense potential for advertising revenue. However, Pandora really needs to sort out the royalty issue or it may be forced to wind up shop. A pity, since the recommendation engine is very well thought through, and quite innovative, making high order personalization possible.

This segment is a part in the series : Deal Radar 2008


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. Kayak Consolidates Travel
. Trulia Can Consolidate Real Estate
. Girls Like Stardoll
. LinkedIn Should Roll-Up Jobs
. Zillow
. TheFind
. Wize Ranks Products
. Retrevo
. Piczo Picture Perfect
. Xanga Losing Steam?
. hi5 Going Strong
. Bill Me Later - Blessed by Amazon
. Takkle Tackling Socially
. Amie Street and the Twenty First Century Renaissance
. eHarmony Replacing Yenta
. Zappos Wants to be Amazon When it Grows Up
. Figleaves and Specialty e-Tail
. Twitter Gaining Momentum
. Tagged In Exit Freeze Danger Zone?
. Digg - Packaging news
. Facebook Woes Coming?
. PlayFirst Plays Casual Games Well
. Kosmix+Adify - Potential Google Challenger
. Travel Ad Network Executing Flawlessly
. Adap.tv Trying to Tackle the Video Ad Problem
. Groople, Interesting Use of Context
. Lucidera
. InsideView's Clever Maneuvering
. Seeking Alpha
. Adify's Market Taking Time to Develop
. Glam Media's Fashion Forays
. Federated Media Needs to Focus
. GigaOM
. TechCrunch
. Yelp
. Slide
. Elance
. oDesk
. SKS Microfinance
. TutorVista
. Seventymm
. Cleartrip
. Yatra
. MakeMyTrip
. Intacct
. Genius
. Xactly
. Jigsaw
. Comcast Buys Plaxo
. Encover
. PayCycle
. Bill.com
. Daptiv
. Inform
. PayScale
. Joost
. VideoEgg
. Mercado
. AKQA
. YuMe
. BitTorrent
. Geni
. Blurb
. Motionbox
. Veoh
. Mimosa Systems
. Metaweb
. Brightcove
. Revver
. Cake Financial
. Mint
. Powerset
. UpTake
. PaidContent
. Mixpo
. Biz360
. Sabrix
. Coremetrics
. Revision3
. Care.com
. Appirio
. Metacafe
. Pandora
. Hulu
. Fabrik
. Flock
. Wetpaint
. ID Analytics
. Ning
. Telanetix
. Dimdim
. ON24
. Veodia
. Jive Software
. Realtime Worlds
. GirlSense
. LifeSize
. Grockit
. Playfish
. Nurien
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. AmberPoint
. Trion World Network
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. Verticals onDemand
. Gaia Interactive
. PubMatic
. Mahalo
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. Sportgenic
. IVT
. Turbine
. ImageSpan
. Entrepreneur Journeys
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. Fliqz
. Elastra
. Challenge Games
. PivotLink
. iForem
. TopTenREVIEWS.com
. Operational Memory LLC,Raleigh, North Calorina
. FeedRoom
. GameDuell
. Fotolia
. EchoSign
. Mevio
. Local Marketers
. Baynote
. BlogHer
. Passenger
. Mobixell
. Wigix
. ExpertCEO
. Zyrion
. Archer Technologies
. SunRun
. NewsGator
. PermissionTV
. Creative Water Solutions
. Carbonetworks
. WiZiQ
. Regent , Frederick,Marryland
. ClickCare
. Studywiz Spark
. Saki Seat
. ShiftWise
. Neulio
. Revolabs

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