Pandora 2016 Annual Report Download - page 35

relationship before the expiration of the agreement on the occurrence of certain events, including material breach of the
agreement by us, and to suspend provision of the services if DoubleClick determines that our use of its service violates certain
security, technology or content standards.
We rely on third parties to provide software and related services necessary for the operation of our business.
We incorporate and include third-party software into and with our apps and service offerings and expect to continue to
do so. The operation of our apps and service offerings could be impaired if errors occur in the third-party software that we use.
It may be more difficult for us to correct any defects in third-party software because the development and maintenance of the
software is not within our control. Accordingly, our business could be adversely affected in the event of any errors in this
software. There can be no assurance that any third-party licensors will continue to make their software available to us on
acceptable terms, to invest the appropriate levels of resources in their software to maintain and enhance its capabilities, or to
remain in business. Any impairment in our relationship with these third-party licensors could harm our ability to maintain and
expand the reach of our service, increase listener hours and sell advertising, each of which could harm our operating results,
cash flow and financial condition.
Digital music streaming is an evolving industry, which makes it difficult to evaluate our near- and long-term business
prospects.
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Digital music streaming continues to develop as an industry and our near- and long-term business prospects are difficult
to evaluate. The marketplace for digital music streaming is subject to significant challenges and new competitors. As a result,
the future revenue, income and growth potential of our business is uncertain. Investors should consider our business and
prospects in light of the risks and difficulties we encounter in this evolving business, which risks and difficulties include,
among others, risks related to:
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• our evolving business model and new licensing models for content as well as the potential need for additional types of
content;
• our ability to develop additional products and services, or products and services in adjacent markets, in order to
maintain revenue growth, and the resource requirements of doing so;
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• our ability to retain current levels of active listeners, build our listener base and increase listener hours;
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• our ability to effectively monetize listener hours by growing our sales of advertising inventory created from
developing new and compelling ad product solutions that successfully deliver advertisers’ messages across the range of our
delivery platforms while maintaining our listener experience;
• our ability to attract new advertisers, retain existing advertisers and prove to advertisers that our advertising platform
is effective enough to justify a pricing structure that is profitable for us;
• our ability to maintain relationships with platform providers, makers of mobile devices, consumer electronic products
and automobiles;
• our ability to continue to secure the rights to music that attracts listeners to the service on fair and reasonable
economic terms.
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Failure to successfully address these risks and difficulties and other challenges associated with operating in an evolving
marketplace could materially and adversely affect our business, financial condition and results of operations.
We have incurred significant operating losses in the past and may not be able to generate sufficient revenue to be profitable.
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Since our inception in 2000, we have incurred significant net operating losses and, as of December€31, 2015, we had an
accumulated deficit of $366.7 million. A key element of our strategy is to increase the number of listeners and listener hours to
increase our industry penetration, including the number of listener hours on mobile and other connected devices. However, as
our number of listener hours increases, the royalties we pay for content acquisition also increase. In addition, we have adopted
a strategy to invest in our operations in advance of, and to drive, future revenue growth. This strategy includes recently
completed acquisitions and other initiatives. As a result of these trends, we have not in the past generated, and may not in the
future generate, sufficient revenue from the sale of advertising and subscriptions, or new revenue sources, to offset our
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