Pandora 2012 Annual Report Download - page 27

Table of Contents
If we fail to effectively manage our growth, our business and operating results may suffer.
Our rapid growth has placed, and will continue to place, significant demands on our management and our operational and financial infrastructure. In
order to attain and maintain profitability, we will need to recruit, integrate and retain skilled and experienced sales personnel who can demonstrate our value
proposition to advertisers and increase the monetization of listener hours, particularly on mobile devices. Continued growth could also strain our ability to
maintain reliable service levels for our listeners, effectively monetize our listener hours, develop and improve our operational, financial and management
controls, enhance our reporting systems and procedures and recruit, train and retain highly skilled personnel. If our systems do not evolve to meet the
increased demands placed on us by an increasing number of advertisers, we may also be unable to meet our obligations under advertising agreements with
respect to the timing of our delivery of advertising or other performance obligations. As our operations grow in size, scope and complexity, we will need to
improve and upgrade our systems and infrastructure, which will require significant expenditures and allocation of valuable management resources. If we fail
to maintain the necessary level of discipline and efficiency and allocate limited resources effectively in our organization as it grows, our business, operating
results and financial condition may suffer.
We face and will continue to face competition for both listener hours and advertising spending.
We compete with other content providers for listener hours.
We compete for the time and attention of our listeners with other content providers on the basis of a number of factors, including quality of experience,
relevance, acceptance and diversity of content, ease of use, price, accessibility, perception of ad load, brand awareness and reputation.
Our competitors include terrestrial radio, satellite radio, and online radio. Terrestrial radio providers such as CBS and Clear Channel 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, such as Sirius XM, 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, currently 8.0%, than internet radio providers for use of sound recordings, giving broadcast and satellite radio companies a
significant cost advantage.
Other online radio providers may offer more extensive content libraries than we offer and some may be accessed internationally.
We also compete with providers of on-demand audio media and entertainment which are purchased or available for free and playable on mobile
devices, automobiles and in the home. These forms of media may be purchased, downloaded and owned such as iTunes audio files, MP3s, CDs, or accessed
from subscription or free online on-demand offerings by music providers such as RDIO, Spotify, and Rhapsody or content streams from other online services
such as Hulu, VEVO, turntable fm and YouTube. In addition, on-demand music providers may leverage their existing infrastructure, brand recognition and
content collections to augment their services by offering competing internet radio features to provide listeners with more comprehensive music service
delivery choices. We face increasing competition for listeners from a growing variety of businesses that deliver audio media content through mobile phones
and other wireless devices.
We believe that companies with a combination of financial resources, technical expertise and digital media experience also pose a significant threat of
developing competing internet radio and digital audio entertainment technologies in the future. In particular, if known incumbents in the digital media space
such as Amazon, Apple, Facebook or Google choose to offer competing services, they may devote greater resources than we have available, have a more
accelerated time frame for deployment and leverage their existing user base and proprietary technologies to provide products and services that our listeners
and advertisers may view as superior. Our current and future competitors may have more well-established brand recognition, more established relationships
with consumer product manufacturers, greater financial, technical, and other resources, more sophisticated technologies or more experience in the markets in
which we compete.
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