Pandora making inroads on AM/FM radio

April 23, 2010, by Rodney Ho

pandora

Pandora, in Greek mythology, is a woman who opened a box that unleashed evil, leaving only hope behind. Online radio service Pandora has been more positive, unleashing consumer choice and a counterpoint to AM/FM radio.

The concept for Pandora is simple. You pick a song or artist and using a special "genome" breakdown of more than 700,000 songs, Pandora creates a station for you. You can rate each song to shape the station to your taste.

Anchored to computers, the free service was a solid at-work utility but unable to build a profitably large audience until it introduced an iPhone application in 2008.

"It took off like a rocket ship," said founder Tim Westergren in a recent interview. "Completely viral. We never advertised Pandora." About 21 million of the estimated 50 million users now use the service on a mobile device, with 30,000 new iPhone users every day. Average listening time per month: 11 hours.

As a result,  the private-held company said it made its first quarterly profit at the end of 2009.

Weekly AM/FM radio listening has fallen 10 percent in the past three years, according to a Bridge study released earlier this month, while listening on phones has gone up significantly.

Pandora is now bringing in as many listeners in Atlanta as a smaller terrestrial radio station.

It now has 960,000 registered users within a 30-mile radius of downtown Atlanta. Westergren told me they have 30 million active users in a given month, so extrapolating that from total registered users, that’s about 60 percent. In Atlanta, that’d be just under 600,000 people.

In comparison, Dave FM, Project 9-6-1 and True Oldies 106.7 draw between 500,000 and 600,000 unique listeners any given week for at least five minutes. (V-103 and B98.5 bring in more than one million each.)

These are not apple-to-apples numbers since I was only able to get monthly users for Pandora. Its weekly user figure is certainly less than 600,000.

Suwanee concert and TV producer Tony May discovered Pandora two years ago. He used it first through his BlackBerry and recently switched to his iPhone. "I have thousands of tunes in my iTunes library, but I now listen to Pandora more," he said, partly because it enables him to hear new artists he might  not have otherwise considered.

He has created 25 different radio stations, some jazz (John Coltrane), some rock (Guns N' Roses), some country (Eric Church). "I get to be my own program director," he said.

May now listens to Pandora 15 to 20 hours a week, much of it in his car, where half of radio listening happens. It has displaced virtually all his AM/FM radio listening. “I might catch WSB for a traffic report but that’s it,” he said. And the commercials on Pandora (about one ad every 15 minutes) is tolerable, he added.

Pandora hopes to become even more convenient for drivers. It has signed a deal with Ford to have its service integrated into a vehicle’s sound system. A voice-activated version is coming out later this year.

In the fast-moving Web world, Pandora's current success hardly guarantees future riches. Feisty rivals such as Slacker are nipping at its heels. And royalties for songwriters and performers eat up 60 percent of gross revenues. The more people listen, the more it costs Pandora, so it needs to keep growing ad revenue to keep up.