Pandora 2012 Annual Report Download - page 29

Table of Contents
Our ability to increase the number of our listeners will depend in part on our ability to establish and maintain relationships with automakers, automotive
suppliers and consumer electronics manufacturers with products that integrate our service.
A key element of our strategy to expand the reach of our service and increase the number of our listeners and listener hours is to establish and maintain
relationships with automakers, automotive suppliers and consumer electronics manufacturers that integrate our service into and with their products. Working
with certain third-party distribution partners, we currently offer listeners the ability to access our service through a variety of consumer electronics products
used in the home and devices connected to or installed in automobiles. We intend to broaden our ability to reach additional listeners, and increase current
listeners hours, through other platforms and partners over time. However, reaching agreements with distribution partners can be time consuming, and once an
agreement is reached, product design cycles can be lengthy. If we are not successful in maintaining existing and creating new relationships, or if we encounter
technological, content licensing or other impediments, our ability to grow our business could be adversely impacted.
Our existing agreements with partners in the automobile and consumer electronics industries generally do not obligate those partners to launch the
integration of our service in their products. In addition, some automobile manufacturers or their supplier partners may terminate their agreements with us for
convenience. Our business could be adversely affected if our automobile partners and consumer electronics partners do not continue to provide access to our
service or are unwilling to do so on terms acceptable to us. If we are forced to amend the business terms of our distribution agreements as a result of
competitive pressure, our ability to maintain and expand the reach of our service and increase listener hours would be adversely affected, which would reduce
our revenue and harm our operating results.
Additionally, we distribute our mobile applications via smartphone application download stores managed by Apple, Google, Amazon, Palm and
Research In Motion, or RIM, and such distribution is subject to an application developer license agreement in each case. Should any of these parties amend
the terms of their license in such a way that inhibits our ability to distribute the Pandora apps via their application store, or negatively impacts 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.
If we are unable to continue to make our technology compatible with the technologies of third-party distribution partners who make our service available
to our listeners through mobile devices, consumer electronic products and automobiles, we may not remain competitive and our business may fail to grow
or decline.
In order to deliver music everywhere our listeners want to hear it, our service must be compatible with mobile, consumer electronic, automobile and
website technologies. Our service is accessible in part through Pandora-developed or third-party developed applications that hardware manufacturers embed
in, and distribute through, their devices. Connected devices and their underlying technology are constantly evolving. As internet connectivity of automobiles,
mobile devices, and other consumer electronic products expands and as new internet-connected products are introduced, we must constantly adapt our
technology. It is difficult to keep pace with the continual release of new devices and technological advances in digital media delivery and predict the problems
we may encounter in developing versions of our applications for these new devices and delivery channels. It may become increasingly challenging to do so in
the future. In particular, the technology used for streaming the Pandora service in automobiles remains at an early stage and may not result in a seamless
customer experience. If automobile and consumer electronic makers fail to make products that are compatible with our technology or we fail to adapt our
technology to evolving requirements, our ability to grow or sustain the reach of our service, increase listener hours and sell advertising could be adversely
affected.
Consumer tastes and preferences can change in rapid and unpredictable ways and consumer acceptance of these products depends on the marketing,
technical and other efforts of third-party manufacturers, which is beyond our control. If consumers fail to accept the products of the companies with whom we
partner or if we fail to establish relationships with makers of leading consumer products, our business could be adversely affected.
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