1. As completely as possible, sketch the value chain for Pandora from the production of content to the listener.
2. How do horizontal and vertical conflict impact Pandora?
3. How does Pandora add value for customers through its distribution functions?
4. Will Pandora be successful in the long term? Why or why not?
For Pandora, one of the biggest players in Internet radio, figuring out the future is both challenging and intimidating. If the regular challenges of growing a new company aren't enough, Pandora also faces a market that is reeling in turmoil. In the new digital world, the way people listen to music continues to change dramatically. It seems likely that Pandora will either lead the changes or fall victim to them.
Pandora was founded just over a decade ago. At that time, a vast majority of music listeners were still getting their groove on in one of two ways: They either popped a CD into their home, car, or personal CD player or they turned on the old AM/FM radio. But the advent of digital formats such as MP3s drove the first nail into the CD's coffin and drew many people away from traditional or "terrestrial" radio. Moreover, like the music business, the radio business has faced major changes of its own. The Telecommunications Act of 1996 reduced limitations on the number of stations that one owner could hold. This led to huge ownership groups that consolidated and standardized listening formats. The result is less diversity on the radio, with shorter playlists and fewer artists represented. From one city to the next, all across the United States, radio stations have become a homogenous lot.
Both of these trends-combined with the explosion of Internet usage and changes in online technologies-have led to a deluge of companies trying to capitalize on the future of music distribution. This includes download services such as iTunes, subscription services such as Rhapsody and eMusic, cloud music players from Google and Amazon, an endless number of Internet radio stations, and even satellite radio network SiriusXM. Today, with an ever-growing list of listening devices and music service models, listening trends continue to evolve. But one thing about the future is certain: The business of listening to music is full of disruption and confusion. Things are changing fast and the winning products and services-indeed, the survivors-are yet to be determined.