Pandora 2012 Annual Report Download - page 36

Table of Contents
• our ability to enjoy the benefits of collective licensing available through performing rights organizations;
• the effects of increased competition in our business;
• our ability to keep pace with changes in technology and our competitors;
• interruptions in service, whether or not we are responsible for such interruptions, and any related impact on our reputation;
• costs associated with defending any litigation, including intellectual property infringement litigation;
• our ability to pursue, and the timing of, entry into new geographic or content markets and, if pursued, our management of this expansion;
• the impact of general economic conditions on our revenue and expenses; and
• changes in government regulation affecting our business.
Seasonal variations in listener and advertising behavior may also cause fluctuations in our financial results. We expect to experience some effects of
seasonal trends in listener behavior due to increased internet usage and sales of media-streaming devices during certain vacation and holiday periods. For
example, we expect to experience increased usage during the fourth quarter of each calendar year due to the holiday season, and in the first quarter of each
calendar year due to increased use of media-streaming devices received as gifts during the holiday season. We may also experience higher advertising sales
during the fourth quarter of each calendar year due to greater advertiser demand during the holiday season. In addition, expenditures by advertisers tend to be
cyclical and discretionary in nature, reflecting overall economic conditions, the economic prospects of specific advertisers or industries, budgeting constraints
and buying patterns and a variety of other factors, many of which are outside our control. While we believe these seasonal trends have affected and will
continue to affect our quarterly results, our trajectory of rapid growth may have overshadowed these effects to date. We believe that our business may become
more seasonal in the future and that such seasonal variations in listener behavior may result in fluctuations in our financial results.
Failure to protect our intellectual property could substantially harm our business and operating results.
The success of our business depends on our ability to protect and enforce our trade secrets, trademarks, copyrights and patents and all of our other
intellectual property rights, including our intellectual property rights underlying the Pandora service. We attempt to protect our intellectual property under
trade secret, trademark, copyright and patent law, and through a combination of employee and third-party nondisclosure agreements, other contractual
restrictions, technological measures and other methods. These afford only limited protection. Despite our efforts to protect our intellectual property rights and
trade secrets, unauthorized parties may attempt to copy aspects of our song selection technology or obtain and use our trade secrets and other confidential
information. Moreover, policing our intellectual property rights is difficult, costly and may not always be effective.
We have filed, and may in the future file, patent applications. It is possible, however, that these innovations may not be protectable. In addition, given
the cost, effort, risks and downside of obtaining patent protection, including the requirement to ultimately disclose the invention to the public, we may choose
not to seek patent protection for certain innovations. However, such patent protection could later prove to be important to our business. Furthermore, there is
always the possibility that our patent applications may not issue as granted patents, that the scope of the protection gained will be insufficient or that an issued
patent may be deemed invalid or unenforceable. We also cannot guarantee that any of our present or future patents or other intellectual property rights will not
lapse or be invalidated, circumvented, challenged or abandoned, that our intellectual property rights will provide competitive advantages to us, that our ability
to assert our intellectual property rights against potential competitors or to settle current or future disputes will not be limited by our relationships with third
parties, that any of our pending or future patent applications will have the coverage originally sought, that our intellectual property rights will be enforced in
jurisdictions where competition may be intense or where legal protection may be weak, or that we will not lose the ability to assert our intellectual property
rights against or to license our technology to others and collect royalties or other payments.
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