Toyota and Pandora Pairing Gives Insight on How Pandora Will Make Money – Will Sirius XM Emulate This Strategy?
This article will likely frustrate SIRI fans who simply hate to hear about anything other than the great content and positive moves Sirius XM Radio has made over the past two years. After all, this site is dedicated to satellite radio news, right? The fact of the matter is that ALL media news is relevant to Sirius XM from both a consumer and investors perspective. The only thing worse than being an uninformed consumer is being an uninformed investor.
Since announcing their intention to go public, Pandora has come under a bit of a microscope with potential investors trying to figure out if going public is a bailout for current private sector investors or an intention of taking the Internet Radio provider to the next level and ultimately, profitable.
There are some that quickly dismiss Pandora as a fad that only appeals to young people looking for freebies, and that advertising simply can not support the huge royalty fees radio services have to pay. The fact of the matter is, Pandora has a wide ranging demographic, the ability to target advertising and they bring in more than $10 million per month in advertising revenue. While I personally see a shift to paying subscribers, Pandora will not likely give up what has become a lucrative advertising platform any time soon.
Pandora has a new deal with Toyota that presents an interesting insight into how a company like Pandora will make money. Today Pandora launched the Toyota “Legends & Icons” campaign across all platforms. According to Pandora, the “Legends & Icons” campaign will last about 1 year and is the biggest advertising campaign the company has inked to date. Having Toyota as a partner should help demonstrate the quality of advertisers Pandora is successful in partnering with.
“Legends & Icons” will feature exclusive content from unnamed internationally acclaimed and award-winning musicians, and is said to also include video and artist-curated mixtape stations. The launch of the campaign will place ads for the Toyota Highlander on Pandora’s Top 40 station. With each new month, consumers will be exposed to a new pairing of station and vehicle.
While some of the SIRI investors who hate this type of news have already tuned out, the remainder should look at this type of news as an opportunity for Sirius XM rather than anything else. Pandora is doing something right. Sirius XM is just now beginning to exploit their Internet Radio side of the business. In fact, Satellite Radio 2.0 will likely have more impact on the Internet delivered content than anything else, at least initially.
If Pandora can parlay their service into big time ad revenue, then Sirius XM certainly has the potential to do the same. The dynamic Pandora is using that Sirius XM has not yet capitalized on is the multi-platform and targeted campaigns. Sirius XM is not allowed to deliver “local” advertising as a condition of the satellite radio spectrum being allocated. However, there is nothing to preclude Sirius XM from advertising in any manner they want on their Internet platform.
The key here is for Sirius XM to learn from services like Pandora and understand the best way to implement their Internet Radio business as well as monetize it. There are challenges, but nothing that a company the size of Sirius XM can’t handle. With the exclusive content Sirius XM has, they have a big advantage and a captive audience.
To date nearly all Sirius XM advertising has been geared toward the satellite radio listening audience. Direct campaigns and using the Internet to garner more dollars is in its infancy at Sirius XM. The good news is that if Pandora can be profitable from an Internet Radio alone standpoint, Sirius XM can do the same. This would make the combination of Internet and satellite quite compelling!
[via Billboard]
Position – Long Sirius XM Satellite Radio
While Pandora may be “buffering….buffering” Sirius is “waiting…sleeping…getting passed by”.
Pandora is NOW.
Sirius is WAIT ANOTHER EIGHT MONTHS to see what we got.
What a joke. They should fire everyone at Sirius XM over the age of 30.
And if it’s “SATRAD 2.0” by its very nature it’s not “NETRAD 2.0”.
Asleep at the switch unfortunately. And I am a significant long and I type this while listening to Pandora.
BTW What’s up with all the talking gibberish on Channel 20, and probably others. The few times I have bothered to listen to XM lately, it is cluttered with DJs talking about nonsense, upcoming movies, etc. Sounds just like commercials to me.
Still listening to Pandora, constant songs, no gabbing. Unfortunately watch and see as Pandora passes by the unimaginative crew at SXM…
PS SXM, make sure you screw things up and release your newfangled 2.0 well into the year so you can’t capitalize on the Christmas purchasers. I know you can do it…
PS2 Just listened to EIGHT songs in a row (and counting) on Pandora without any commercials or comment. Try doing that with SXM.
And you have a position in sirius/xm, why? I agree I’m concerned about 2.0. but I can’t understand the complaints about the content. I like a little of what I call, Sirius/Xm,”The Human Contact Project.” I’ve got the skydock w/best of sirius and love the musical buffet. Factor in the “tag” feature and I really don’t have to download a song, I’ll hear what I like plenty. As for as 2.0 I am worried when Mel says, and don’t quote me, If our subscribers want a internet type service we could provide that for them. I’d like to hear him say 2.0 will provide that for them.
Sirius is ahead of the game….that’s why all the “Internet radio stations”
Are rushing to change their business model to one that resembles Siri.
It’s will be much easier for Sirius to add a pandora like function to satrad than it will be to add a subscription service to Internet radio.
That being said: I believe there is room for all the players, it’s just that Sirius has a big headstart and they are already profitable.
Position:long siri
Sports and Stern. Music is not enough. IPOD has the music market.
At the 2/15/11 Conference Call, Mel Karmazin said the following:
“We think that there is an awful lot of people who like the, Slacker, Pandora, Last.fm, iheart services because it’s free. Nothing is really free because the way they make their money is they make you listen to commercials and a lot of that IP content as they get and try to get more and more revenue are going to be running more and more commercials.”
On 2/22/11, Spencer Osborne rebutted as follows:
“As for Karmazins comment…..He is pumping so much shit in that statement that we all need to buy hip waders! Anyone who believes what Karmazin is saying there on blind faith is a bigger idiot than I could possibly imagine!”
On the same date . . . Spencer Osborne:
“What many fail to realize is that the new royalty deals make it more beneficial for Internet Radio services to become subscription based, which is exactly the move Pandora and Slacker have already shifted to.”
Now on March 4, 2011 . . . Spencer Osborne:
“While I personally see a shift to paying subscribers, Pandora will not likely give up what has become a lucrative advertising platform any time soon.”
Which takes us back to Mel Karmazin on 2/15/11:
“And again, we like our business model, which is principally subscription driven as compared to the model of where you’re offering service for free and running commercials, that sounds an awful lot like Terrestrial Radio.”
Roadkill….
My position is the same now as it was before.
With their new royalty deal Pandora can pay only 25% of revenue.
The hook is that they need to get revenue high enough to be a bigger number than the “per song/per listener” number. Once that happens they shift from paying about 45% of revenue to only 25%. The way they get the revenue number bigger is via their premium tier and subscription service.
Why would Sirius-XM want to mirror a broken business model ?
sxminvestor….
The Pandora model is not broken. That is a farce portrayed upon Sirius XM investors far too often. The facts are that Internet radio will not only exist, but will thrive as well. This is not to say that Internet radio will “bury” Sirius XM…..because it wont. The real issue is how much of the audio entertainment pie Sirius XM has. They need to maintain what they have and even get a bigger piece.
I’m curious Spencer, which of the internet radio providers has the best chance of “winning” or can they all survive? It seems to be getting crowded.
Ando Media has released its monthly Internet radio rankings for December 2010, with its Domestic and All Streams rankings broken down by daypart and by Average Active Sessions (AAS).
Once again, Pandora and CBS Radio dominate the Ando rankers, with Pandora landing at #1 for the Domestic Ranker (M-F, 6a-8p) with an overwhelming 642,614 AAS and over 236.8 million session starts. CBS Radio came in second with 168,410 AAS. Clear Channel Radio was ranked third, with Citadel at #4 and Slacker up to #5. The top ten was rounded out by Entercom, ESPN Radio, Cox, Cumulus and Digitally Imported Inc.
For December’s All Streams Ranker (M-F, 6a-8p), CBS Radio was #1, followed by Digitally Imported at #2. 977Music.com was ranked #4 with Slacker at #5. The top ten is filled out by Entercom, 1.FM, ESPN, Cox, AccuRadio and Cumulus.
Pandora dominates the Domestic Ranker for the full week (6a-mid) as well, with over half a million AAS and 354.6 million session starts. CBS Radio was ranked #2, with Clear Channel, Citadel and Slacker rounding out the top five. They were followed by Entercom, ESPN, Cox, Cumulus and Digitally Imported.
For the All Streams Ranker (full week, 6a-mid), CBS Radio was also on top, with Digitally Imported at #2. 977Music.com, Slacker and 1.FM fill out the top five. The top ten is made up of Entercom, ESPN, AccuRadio, Cox and Cumulus.
I take all competition seriously and hope Sirius does also. Pandora gets a lot of air time.Makes me wonder why Sirius doesn’t get more, why they don’t advertise more. The fight for existence is over. Maybe they will now go to the next level. I would love for them to leap ahead and do some cutting edge things. I’m hoping that is where they are headed. Attack! Attack! Some of us aren’t afraid to know the competition.
name change.
lol
Clear Channel recently bought Thumbplay, a cloud- based music tec. Bob Pittman,chairman at Clear Channel was on CNBC this week and made these comments:
“However, Pittman is uncertain such digital radio platforms are viable as free-standing businesses.”
“For us, it’s a feature as part of something bigger. How you make money? I’m not sure it’s a free-standing business,” Pittman said. “So for us, we’re looking for things to add in — They don’t have to be in themselves money makers, they just have to make the overall offering bigger and better.”
This is where I’m confused. It sounds to me like he’s saying we’re adding these custom-based playlist to people as a loss-leader. It kinda sounds like everybodys rushing in just because everybodys rushing in. Make or buy customized tec. put it out there and we’ll figure out how to make money with it later. Is it even really radio?
I find it funny How Pandora is compared to SIRI with overall cost of euqipment to install in the car alonbe to listen is like 3 years of Sirius if not more, Or How IT IS ABOUT CONTENT or maybe how people are going to pay for all the bandwith overages. Or maybe How I do not want to spend hours updating palylists and or downloading music. Or maybe How I like to hear DJ’s especially ones from the past of the old radio ERA’s which in itself makes it appealing. Shall I go on.
1. It costs $0 to get Pandora in my car.
2. I pay no overages for streaming and I do not have unlimited plan.
Please do go on but, dont forget to talk about the cons of Sirius XM. Like the price, inferior sound quality, and drop outs when driving through the suburbs because of trees and power lines.
I love Sirius XM but it is no picnic.
Please spare me. Because you do not pay these charges many will and it is all about content. What is the difference between terr. radio and all these other Internet radio programs not much. Pandora will have to become more ad based to generate income and it is all about Content. SIR is way ahead of the game and with 2.0 coming it will be everything all these others are wrapped up in one. Mel also said ” New data services coming” and how about that Xm satellites are video capable now with streaming just starting to become a big thing. SIRIUSXM and it’s satellites alone will be a huge driver going forawrd with all this technology coming. PanBorya(Pandora is a joke unless maybe your like 18) besides when you want to hear CNBC, BLoomberg, Oprah, Fox news, Comedy, Martha Stewart, Howard you habve to tune to SIRIUSXM. COme on now please, really.
Shhhhh! Please don’t type too loudly. You may wake up the powers-that-be at SiriusXM…
I love Sirius. 2 main concerns that hopefully will be addressed in the near future, is getting major leaugue baseball rights to best of xm for Sirius, and getting a better richer sound quality for tunes, similar to FM.
How is Pandora going to compete against something like exploretunes?