In recent years, free internet radio has spiked in popularity. Consumers can obtain seemingly unlimited music with limited advertising for free with just the click of a button. This groundbreaking introduction to the music industry is available on almost every electronic device, from computers, to cars, to smart phones. With new technology that allows internet radio to be played in a variety of settings and consumers ability to chose a specific genre or artist, it is possible it has successfully become a substitute for purchased music. One of the more successful free internet radio providers, Pandora, had over 100 million users in 2011, with 36 million monthly active users. Pandora possess a music library that consists of 710,000 and uses consumers reviews to create playlists that the individual will enjoy.
For my final project, I will look at how Pandora, among other free internet radio stations, has impacted purchased music, such as CD's and itunes music. I will look at the affect on consumers listening and purchasing habits, its affect on record labels distribution of their product and profits for them and their artists, and the interplay between Pandora and advertisers. In 2009, Pandora’s profit of $40 million dollars was almost completely through selling space to advertisers. These ads were targeted based on age and location. I wish to research if there is a common demographic these advertisers target and what steps Pandora takes to attract more potential advertisers and their targeted customers. Lastly, I will look at how the sale of music will adapt compared to the adaptions of Internet radio.
I hypothesis, even though there have been reports of bands having increased record sales due to Pandora, that the success of internet radio has a negative affect on the sales and revenue garnered from purchased CD’s and individual songs on iTunes. With CD sales over $10 dollars and individual songs being sold at $1.29 on iTunes, I would guess most consumers would take a quality free option where they can still listen to the music they wish without hurting their wallet.
Two interesting articles on Pandora are “Pandora Internet Radio has 100 Million Users” and “Pandora’s Free Online Radio gets Boost from iPhone, Ford.”