Pandora Launches Public Beta In Australia & New Zealand

by Trefis Team
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Pandora Media (NYSE:P) has taken an important step forward in its goal to expand internationally and has launched a public beta of its internet radio service in Australia & New Zealand. While Pandora has a good market presence in the U.S., setting up a similar presence in international markets is not going to be easy given the complexities of acquiring content.

The company’s expansion into international markets is not only a growth initiative, but also a strategic one. Given the increasing competition in the U.S. from players such as Spotify, Clear Channel Radio and others, it makes sense for the company to diversify its geographic exposure. Furthermore there is no doubt that the potential for subscriber growth in international markets is quite large as internet penetration continues to rise and internet-enabled device adoption increases. Though the population of Australia and New Zealand is much lower than the US, the low penetration of internet radio presents a lucrative opportunity for Pandora.

See our complete analysis for Pandora Media

Australia has a population of over 22 million residents and fewer than 1 million Australians listened to internet radio in 2011. [1] Also,¬†as of 2011, less than 9% of the population aged 14 and over in Australia used their smartphones to listen to the radio. [1] This in stark contrast to the U.S. where out of a population of 310 million Pandora has close to 150 million registered users. This suggests that there is opportunity for internet radio penetration to increase significantly in Australia.¬†Negotiating royalty rates with artists and music labels is going to be an important element of the company’s international expansion strategy. Pandora has not yet disclosed this information.

Our price estimate for Pandora Media stands at $7.90, implying a discount of about 20% to the market price.

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Notes:
  1. ACMA Communications report 2010-11 [] []
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  • commented 2 years ago
  • tags: F P GM SIRI CBS
  • While the expansion of Pandora is good in some regards, it is not what's best for the artists whose music props up Pandora; in fact it's far from the best option for the musicians that prop up an entire industry of music distributers. Pandora like many other companies offers music free of charge to its customers, as Pandora Media only pays a fraction of a cent to the record companies and artists for each song they play.
    This arrangement may be appealing to the average consumer who want to take advantage of free music, but it is close to impossible for emerging artists and those not in the highest echelon of the music industry to sustain themselves. These artists make up the vast majority of musicians, and will be the stars in years to come if they have not already attained such status; however, how are they supposed to continue to produce music if companies such as Pandora pay shallow fees for their music? They can't.
    The music distribution market may be changing as consumers take advantage of the free music that the Internet offers, but this trend is not sustainable for the music industry, and with the spread of sites such as Pandora musicians will continue to struggle.