ey case compeition pandora

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Ernst and Young Case Competition

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  • 1. Purple & GOLD
    CONSULTING
    Cameron Chinn
    Venkat Rao
    Elaine Raymond
    Vance Roush

2. Objective
Goal
Position Pandora to create new revenue streams and refine existing ones, for long-term sustained growth
NPV = $11,195,609
Purple &GOLD
CONSULTING
Situation
Analysis
Strategy
Action
3. Introduction
Situation
Purple &GOLD
CONSULTING
4. Problem
Purple &GOLD
CONSULTING
Situation
Analysis
Action
Strategy
Conclusion
Analysis
5. Industry Potential
300K Subscribers
48M Users
Purple &GOLD
CONSULTING
Increasing Partners and Venues
In 2008, Pandora built an iPhone app that let people stream music. Almost immediately, 35,000 new users a day joined Pandora from their cellphones, doubling the number of daily sign-ups
At the end of 2009, Pandora reported its first profitable quarter and $50 million in annual revenue mostly from ads and the rest from subscriptions and downloads. Revenue will probably be $100 million this year, said Ralph Schackart, a digital-media analyst at William Blair.
Situation
Analysis
Action
Strategy
Conclusion
Analysis
6. Broad Competitive Landscape
Purple &GOLD
CONSULTING
Situation
Analysis
Action
Strategy
Conclusion
Analysis
7. Competitive Options
Purple &GOLD
CONSULTING
Proven that consumers prefer Music Genome Project (recommendations from music experts) over community generated recommendations
Situation
Analysis
Action
Strategy
Conclusion
Analysis
8. Pandoras Current Business Model
240.4 Million People Ages 14+*
29% Stream Online Audiot
20% of radio users listen to online
radio Go beyond the browser!
69.7 Million
Potential Listeners
Users
Partners

  • Mobile

9. Home Entertainment-Cars
Ad Partners
Purple &GOLD
CONSULTING
New Revenue Stream
New Revenue Stream
Subscription Revenue
Ad Revenue
MAXIMIZE
Situation
Analysis
Action
Strategy
Conclusion
Analysis
10. Situation
Analysis
Purple &GOLD
CONSULTING
11. Strategy Options
Purple &GOLD
CONSULTING
Situation
Analysis
Action
Strategy
Conclusion
Analysis
12. Utilizing the Framework
Evaluating Key Factors:

  • Investment Costs

13. Revenue Generation 14. Increase in Brand Value 15. Legal Barriers 16. FeasabilityPurple &GOLD
Possible Strategies:

  • Pandora Open Mic

17. Pandora Video 18. Pandora International 19. Refine Current OfferingsCONSULTING
Situation
Analysis
Action
Strategy
Conclusion
Analysis
20. Framework Analysis
Purple &GOLD
CONSULTING
Situation
Analysis
Action
Strategy
Conclusion
Analysis
21. GE Analysis
Open Mic
Pandora Intl
Pandora Video
Refinement
High
Payoff
Purple &GOLD
CONSULTING
Low
High
Low
Feasibility
Situation
Analysis
Action
Strategy
Conclusion
Analysis
22. Analysis
Strategy
Purple &GOLD
CONSULTING
23. Overall Strategy
Pandora needs Long-Term Sustainable Growth Model Ad revenue and hopeful subscriptions not enough
Short-Term Strategy
Open Mic Platform
Long-Term Strategy
Refinement is sustainable
Record Label
Product extension around valued artists
Purple &GOLD
CONSULTING
Situation
Analysis
Action
Strategy
Conclusion
Analysis
24. Refinement
Lower Time Limit
20-40 hours a month
11.9% of users
21% of hours
No direct revenue from users
Annual Cost Savings = $586,000
First continuance payment at 20 hours
Purple &GOLD
CONSULTING
Situation
Analysis
Action
Strategy
Conclusion
Analysis
25. Refinement
Watch Advertisement / Payment
Continuance fees:
Watch extended ad
Pay continuance fee
20 hrs - watch 1-min commercial or pay $.25
40 hrs - watch 2 1-min commercial or pay $.99
Revenue from video advertisement is $90 per 1000 views
Purple &GOLD
CONSULTING
Situation
Analysis
Action
Strategy
Conclusion
Analysis
26. Open Mic

  • Online Battle of the Bands

27. Subscriber to enter 28. 250,000 new subscriptions over 3 years = $9,000,000 29. Registered to vote 30. $10 per song 31. Projected participation: 32. Myspace music pages = 8 million 33. Year 1 = 200,000 songs submitted 34. Year 2 = 300,000 songs submitted 35. Year 3 = 500,000 songs submitted 36. Available for listening/voting for one weekPurple &GOLD
CONSULTING
Situation
Analysis
Action
Strategy
Conclusion
Analysis
37. Open Mic

  • Incentive:

38. Potential heard by 50 million listeners (1/6 of the US population) 39. Your own channel 40. Weekly Winners Spotlight 41. Download the song 42. Become part of Pandoras music library 43. Set-up 44. Top ten songs listed on home page 45. See all page 46. Searchable by genre, region, artist 47. Thumbs up, thumbs down 48. Fits with Music Genome Project (Core Competency)Purple &GOLD
CONSULTING
CROWD-SOURCING
Situation
Analysis
Action
Strategy
Conclusion
Analysis
49. Purple &GOLD
CONSULTING
Situation
Analysis
Action
Strategy
Conclusion
Analysis
50. Joe Guitar18-34 aspiring musician
8M Myspace Music
Artists
Purple &GOLD
CONSULTING
Situation
Analysis
Action
Strategy
Conclusion
Analysis
51. Online Record Label for Indie Artists

  • Access to artists with established following (Open Mic)

52. Ability to gauge where concerts would be on demand and what demographic to target 53. Data to track most popular music trends 54. Established Distribution Network 55. Market Potential: Indie Market 56. The global music market is approximately $40 to $48 billion 57. 30% of the global music market belongs to indie labels ($12 to $16 billion) 58. Internet sales in 2004 account for 6% of overall units soldPurple &GOLD
CONSULTING
Situation
Analysis
Action
Strategy
Conclusion
Analysis
59. Competitor Reactions
Open Mic
There may be imitation, but Pandora will have the first mover advantage
Indie Online Record Label
Competitors may start their own record label, but Pandora has a larger user base in the US, therefore more potential fans than the competition
Purple &GOLD
CONSULTING
Situation
Analysis
Action
Strategy
Conclusion
Analysis
60. Strategy
Action
Purple &GOLD
CONSULTING
61. Financials
Revenue Assumptions
Purple &GOLD
CONSULTING
Situation
Analysis
Action
Strategy
Conclusion
Analysis
62. Financials
Cost Assumptions
Purple &GOLD
CONSULTING
Situation
Analysis
Action
Strategy
Conclusion
Analysis
63. Financials
Purple &GOLD
CONSULTING
NPV = $11,195,609
Situation
Analysis
Action
Strategy
Conclusion
Analysis
64. Timeline
Launch Open Mic
Evaluate Feasability of Online Record Label
Implement Video Ads
Purchase TV ads on MTV
Purple &GOLD
2011
2012
2013
CONSULTING
Performance Analysis of Initiatives
Web Still Ads on Facebook & MTV.com
Purchase Web Video Ads on Hulu
Purchase Ad Banners at Concert Venues
Situation
Analysis
Action
Strategy
Conclusion
Analysis
65. Action
Conclusion
Purple &GOLD
CONSULTING
66. Competitor Analysis

  • Limited usage of Next

Track option

  • No song search capability

Personalized Radio
Type
Advantages
Disadvantages

  • Individual song analysis

67. Free to use online 68. User friendly interface 69. Portable option 70. Complex user interface 71. Recommendations requires software download

  • Radio based on genre

72. Widespread use 73. Social networkingUser Radio

  • Preset stations only

74. Subscription fee 75. Stations dont play desired music
Streaming Radio

  • Brand-name recognition

76. Portable 77. Cost per individual song 78. Many alternatives 79. Only accessible for credit card holders

  • Portable

80. Song search capabilityDigital Downloads
81. Financial Projections

  • Expanding user base

82. Increasing user referrals 83. Growing subscription rates
Pandora begins to expend resources on advertising, resulting in:
Revenue by Source
200720082009201020112012
200720082009201020112012
Advertisements Subscriptions
500% growth in user base over 5 years increases revenue over tenfold.
Expected Financials
Revenue and EBIT
Background | Market | Competition | Business Model | Financials| Exit Strategy
84. Financial Calculations
85. Revenue Calculations