Friday, February 17, 2012

Pandora Internet Radio Affecting the Purchase of Music?

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. 


  1. I think that this is a great topic. As someone that is looking at this I would recommend to you that you also look their competitors and how they work within this market. I think that it would also be beneficial to note how Pandora makes their profits and how that differs from outlets such as iTunes

  2. Great Idea Adam! I think its an interesting idea especially since pandora is a service that lies somewhere between cloud music and regular music downloads (it has aspects of both in my opinion). I think the best aspect of Pandora radio is that it uses the music genome project which is meant to help users become linked and introduced to new, similar artists. This is a form of advertising that supplements the direct form of advertising that is essential to the three party system at play. I might argue that while it might deter people from buying music, it also may entice consumers to buy more or new artists they had never encountered before. Maybe look into data that shows if people are buying newer artists as a result of the service. It would really be interesting to see how other forms of advertising fit into the grand scheme of Pandora.

  3. Adam, really like the topic idea. I think it may be beneficial to look at advertising in regards to the specific "station" on Pandora. As you know, the stations feature a variety of similar artists, or styles. That being said, I think it would be useful to analyze how potential advertisers take this into account. Obviously, certain advertisers will choose stations that they believe have the desired target audience. I believe each "station" or channel will have its own unique demographic, and thus its own unique set of advertisers. Hope that helps.

  4. Interesting topic!
    I agree with some of the above comments about looking at competitors of Pandora to get a better sense about the topic. Because on Pandora you cannot chose the specific song you want, maybe other similar sites have a stronger competition when it comes to purchasing CDs.

    Also, one benefit of Pandora is the possibility of introducing individuals to an artist they don't know. Does this help increase some CD sales or are artists attempting to get their music on Pandora to help promote themselves?