Pandora files for IPO
Pandora Media Inc., an Internet streaming radio service used by more than 80 million listeners, announced plans Friday to sell shares in an initial public offering this year.
Pandora, which has a catalog of 800,000 songs from more than 80,000 artists, has roughly half the market for Internet radio in 2010, according to a study published in November by Ando Media. Though the service is wildly popular, it has yet to make a profit.
In its prospectus filed with the Securities and Exchange Commission, Pandora reported a $16.8-million loss on $55.1 million in revenue for its fiscal year ended Jan. 31, 2010. From Feb. 1, 2010 through Oct. 31, Pandora narrowed its losses to $300,000 on $90.1 million in revenue.
Because Pandora is largely a free service, only about 10% of its revenue came from subscriptions and other paid services. The vast majority of the company’s revenue came from advertising.
When the Oakland, Calif., company was founded in 2000 by Tim Westergren, Pandora was more of a curious academic experiment. Then called the Music Genome Project, it used musicians to analyze the attributes of all types of music, from early Renaissance madrigals to funk.
Five years later, the company introduced an Internet radio service called Pandora that used data collected from the Music Genome Project to play songs that sounded similar to individual listeners’ favorite tunes or bands.
Though wildly popular, the company limped along financially until 2008, when Westergren announced that Pandora was on the brink of collapse because federal courts had ordered Internet radio stations to pay a dramatic, retroactive increase in performance royalties.
After a public campaign launched by Pandora fans who wrote letters of support to lawmakers, the fees were ratcheted down in 2009, sparing Pandora from what seemed like certain extinction.
Pandora still forks over 60% of its revenue to pay royalties, but the reprieve enabled the company to focus on growing rather than just staying alive.
The service first became available on computer via Web browsers, but its membership took off when Pandora introduced a version for the Apple iPhone in 2008. About half of Pandora’s subscribers use the service on mobile devices.