Pandora 2016 Annual Report Download - page 41

Interruptions or delays in service arising from our own systems or from our third-party vendors could impair the delivery of
our service and harm our business.
€
We rely on systems housed at our own premises and at those of third-party vendors, including network service providers
and data center facilities, to enable listeners to stream our content in a dependable and efficient manner. We have experienced
and expect to continue to experience periodic service interruptions and delays involving our own systems and those of our
third-party vendors. In the event of a service outage at our main site, we maintain a backup site that can function in read-only
capacity. We do not currently maintain live fail-over capability that would allow us to instantaneously switch our streaming
operations from one facility to another in the event of a service outage. In the event of an extended service outage at our main
site, we do maintain and test fail-over capabilities that should allow us to switch our live streaming operations from one facility
to another. Both our own facilities and those of our third-party vendors are vulnerable to damage or interruption from
earthquakes, floods, fires, power loss, telecommunications failures and similar events. They also are subject to break-ins,
hacking, denial of service attacks, sabotage, intentional acts of vandalism, terrorist acts, natural disasters, human error, the
financial insolvency of our third-party vendors and other unanticipated problems or events. The occurrence of any of these
events could result in interruptions in our service and to unauthorized access to, or alteration of, the content and data contained
on our systems and that these third-party vendors store and deliver on our behalf.
€
We do not exercise complete control over our third-party vendors, which makes us vulnerable to any errors,
interruptions, or delays in their operations. Any disruption in the services provided by these vendors could have significant
adverse impacts on our business reputation, customer relations and operating results. Upon expiration or termination of any of
our agreements with third-party vendors, we may not be able to replace the services provided to us in a timely manner or on
terms and conditions, including service levels and cost, that are favorable to us, and a transition from one vendor to another
vendor could subject us to operational delays and inefficiencies until the transition is complete.
€
If our security systems are breached, we may face civil liability and public perception of our security measures could be
diminished, either of which would negatively affect our ability to attract and retain listeners and advertisers.
€
Techniques used to gain unauthorized access to corporate data systems are constantly evolving, and we may be unable to
anticipate or prevent unauthorized access to data pertaining to our listeners, including credit card and debit card information
and other personally identifiable information. Like all internet services, our service, which is supported by our own systems and
those of third-party vendors, is vulnerable to computer malware, Trojans, viruses, worms, break-ins, phishing attacks, denial-
of-service attacks, attempts to access our servers to acquire playlists or stream music in an unauthorized manner, or other
attacks on and disruptions of our and third-party vendor computer systems, any of which could lead to system interruptions,
delays, or shutdowns, causing loss of critical data or the unauthorized access to personally identifiable information. If an actual
or perceived breach of security occurs on our systems or a vendor’s systems, we may face civil liability and reputational
damage, either of which would negatively affect our ability to attract and retain listeners, which in turn would harm our efforts
to attract and retain advertisers. We also would be required to expend significant resources to mitigate the breach of security
and to address related matters. Unauthorized access to music or playlists would potentially create additional royalty obligations
with no corresponding revenue.
€
We may not be able to effectively control the unauthorized actions of third parties who may have access to the listener
data we collect. The integration of the Pandora service with apps provided by third parties represents a significant growth
opportunity for us, but we may not be able to control such third parties’ use of listeners’ data, ensure their compliance with the
terms of our privacy policies, or prevent unauthorized access to, or use or disclosure of, listener information, any of which
could hinder or prevent our efforts with respect to growth opportunities.
€
Any failure, or perceived failure, by us to maintain the security of data relating to our listeners and employees, to comply
with our posted privacy policy, laws and regulations, rules€of self-regulatory organizations, industry standards and contractual
provisions to which we may be bound, could result in the loss of confidence in us, or result in actions against us by
governmental entities or others, all of which could result in litigation and financial losses, and could potentially cause us to lose
listeners, artists, advertisers, revenue and employees.
€
We are subject to a number of risks related to credit card and debit card payments we accept.
€
We accept subscription payments through credit and debit card transactions. For credit and debit card payments, we pay
interchange and other fees, which may increase over time. An increase in those fees would require us to either increase the
prices we charge for our products, which could cause us to lose subscribers and subscription revenue, or absorb an increase in
our operating expenses, either of which could harm our operating results.
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