Pandora 2016 Annual Report Download - page 31

face increasing competition for listeners from a growing variety of music services that deliver music content through mobile
phones and other wireless devices. Our direct competitors in the internet radio segment include iHeart Radio, iTunes Radio,
Beats 1 Radio, LastFM and other companies in the traditional broadcast and internet radio market. We also directly compete
with the non-interactive,€Internet radio offerings provided by digital music streaming services such as Spotify, Google Play
Music and Slacker, and we compete more broadly with the interactive music services offered by these companies and others,
such as Apple Music, YouTube and Amazon Prime Music.
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Our competitors also include terrestrial radio and satellite radio services, many of which also broadcast on the internet.
Terrestrial radio providers offer their content for free, are well established and accessible to listeners and offer content, such as
news, sports, traffic, weather and talk that we currently do not offer. In addition, many terrestrial radio stations have begun
broadcasting digital signals, which provide high-quality audio transmission. Satellite radio providers may offer extensive and
oftentimes exclusive news, comedy, sports and talk content, national signal coverage and long-established automobile
integration. In addition, terrestrial radio pays no royalties for its use of sound recordings and satellite radio pays a much lower
percentage of revenue, 10% in 2015 and 10.5% in 2016, than internet radio providers for use of sound recordings, giving
broadcast and satellite radio companies a significant cost advantage. We also compete directly with other emerging non-
interactive internet radio providers, which may offer more extensive content libraries than we offer and some of which may be
accessed internationally.
We compete for the time and attention of our listeners with providers of other forms of in-home and mobile
entertainment. To the extent existing or potential listeners choose to watch cable television, stream video from on-demand
services or play interactive video games on their home-entertainment system, computer or mobile phone rather than listen to
the Pandora service, these content services pose a competitive threat. We also compete with many other forms of media and
services for the time and attention of our listeners, including non-music competitors such as Facebook, Google, MSN, Yahoo!,
ABC, CBS, FOX, NBC, The New York Times and the Wall Street Journal, among others.
We believe that companies with a combination of financial resources, technical expertise and digital media experience
also pose a significant threat. For example, Apple, Amazon and Google have recently launched competing services. These and
other competitors may devote greater resources than we have available, have a more accelerated time frame for deployment, be
willing to absorb significant costs to acquire customers through free trials or other initiatives, operate their music services at a
loss in order to drive their other profitable businesses, and leverage their existing user base and proprietary technologies to
provide products and services that our listeners and advertisers may view as superior or more cost effective. Our current and
future competitors may have more well established brand recognition, more established relationships with music content
companies and consumer product manufacturers, greater financial, technical and other resources, more sophisticated
technologies or more experience in the markets, both domestic and international, in which we compete.
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We also compete for listeners on the basis of the presence and visibility of our app, which is distributed via the largest
app stores operated by Apple, Google, Amazon and Microsoft. Such distribution is subject to an application developer license
agreement in each case. We face significant competition for listeners from these companies, who are also promoting their own
digital music and content online through their app stores. Search engines and app stores rank responses to search queries based
on the popularity of a website or mobile application, as well as other factors that are outside of our control. Additionally, app
stores often offer users the ability to browse applications by various criteria, such as the number of downloads in a given time
period, the length of time since a mobile app was released or updated, or the category in which the application is placed. The
websites and mobile applications of our competitors may rank higher than our website and our Pandora app, and our app may
be difficult to locate in app stores, which could draw potential listeners away from our service and toward those of our
competitors. In addition, our competitors’ products may be pre-loaded or integrated into consumer electronics products or
automobiles, creating an initial visibility advantage. If we are unable to compete successfully for listeners against other digital
media providers by maintaining and increasing our presence and visibility online, in app stores and in consumer electronics
products and automobiles, our listener hours may fail to increase as expected or decline and our business may suffer.
Additionally, should any of these parties reject our app from their app store or amend the terms of their license in such a way
that inhibits our ability to distribute our apps, or negatively affects our economics in such distribution, our ability to increase
listener hours and sell advertising would be adversely affected, which would reduce our revenue and harm our operating
results.
To compete effectively, we must continue to invest significant resources in the development of our service to enhance
the user experience of our listeners.
Additionally, in order to compete successfully for advertisers against new and existing competitors, we must continue to
invest resources in developing and diversifying our advertisement platform, harnessing listener data and ultimately proving the
effectiveness and relevance of our advertising products. There can be no assurance that we will be able to compete successfully
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