Pandora 2016 Annual Report Download - page 52

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (MD&A)
€
You should read the following discussion of our financial condition and results of operations in conjunction with the
financial statements and the notes thereto included elsewhere in this Annual Report on Form€10-K. The following discussion
contains forward-looking statements that are subject to risks and uncertainties. Actual results may differ substantially from
those referred to herein due to a number of factors, including but not limited to those discussed below and elsewhere in this
report, particularly in the sections entitled "Special Note Regarding Forward-Looking Statements and Industry Data" and
"Risk Factors."
We changed our fiscal year from the twelve months ending January€31 to the calendar twelve months ending
December€31, effective beginning with the year ended December€31, 2013. As a result, the period ended December 31, 2013
was shortened from twelve months to an eleven-month transition period.
When financial results for the 2014 annual period are compared to financial results for the 2013 period, the results
compare the twelve-month period ended December 31, 2014 and the eleven-month period ended December 31, 2013.
Overview
€
Pandora
Pandora is the world’s most powerful music discovery platform, offering a personalized experience for each of our
listeners wherever and whenever they want to listen to music -€whether through earbuds, car speakers or live on stage. Our
vision is to be the definitive source of music discovery and enjoyment for billions. The majority of our listener hours occur on
mobile devices, with the majority of our revenue generated from advertising on these devices. We offer both local and national
advertisers the opportunity to deliver targeted messages to our listeners using a combination of audio, display and video
advertisements.€Founded by musicians, Pandora also empowers artists with valuable data and tools to help grow their careers
and connect with their fans.
€
For the twelve months ended December 31, 2015, we streamed 21.11 billion hours of internet radio, and as of
December€31, 2015, we had 81.1 million active users during the prior 30-day period. Since we launched our non-subscription,
ad-supported radio service in 2005 our listeners have created over 9 billion stations.
€
At the core of our service is our set of proprietary personalization technologies, including the Music Genome Project and
our playlist generating algorithms. The Music Genome Project is a database of over 1,000,000 uniquely analyzed songs from
over 350,000 artists, spanning over 600 genres and sub-genres, which we develop one song at a time by evaluating and
cataloging each song’s particular attributes. When a listener enters a single song, artist, comedian or genre to start a station, the
Pandora service instantly generates a station that plays music or comedy we think that listener will enjoy. Based on listener
reactions to the recordings we pick, we further tailor the station to match the listener's preferences. Listeners also have the
ability to add variety to and rename stations, which further allows for the personalization of our service.
€
We currently provide the Pandora service through two models:
€
• Free Service. Our free service is advertising-supported and allows listeners access to our music and comedy
catalogs and personalized playlist generating system for free across all of our delivery platforms.
€
• Pandora One. Pandora One is a premium daily, monthly or annual paid version of the Pandora service, which
currently includes advertisement-free access. Pandora One also enables listeners to have more daily skips, enjoy
higher quality audio on supported devices and enjoy longer timeout-free listening.
A key element of our strategy is to make the Pandora service available everywhere that there is internet connectivity. To
this end, we make the Pandora service available through a variety of distribution channels. In addition to streaming our service
to computers, we have developed Pandora mobile device applications (“apps”) for smartphones and mobile operating systems,
such as the iPhone, Android and the Windows Phone and for tablets including the iPad and Android tablets. We distribute those
mobile apps free to listeners via app stores. In addition to smartphones and tablets, Pandora is now integrated with more than
1,700 connected devices, including automobiles, automotive aftermarket devices and consumer electronic devices.
€
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