Pandora

Pandora.com is a free online music listening website. It allows users to register an account for free, to pick the music they want for free, and most importantly to listen to the music for free. What is their pricing strategy? Free! However there is an account upgrade for a fee.

With these two options, Pandora offers to pricing strategies. The first is a free service that gives users a large amount of access to the site and music without having to pay for any of it. Pandora can offer this because it utilizes the advertising model described in Anderson’s Taxonomy. The free content on Pandora is sponsored by advertisers that place banner ads and videos on the Pandora website. Pandora also uses the zero marginal cost approach which is distributing digital content at virtually no cost to audiences. The free pricing strategy makes Pandora quite easy to use. A user can simply go on to the website, and immediately begin listening to music without having to create an account. The user will be prompted to type in an artist or a song name. Pandora will bring up the song or a song by that band and play it. If the user likes the song they can click the thumbs up box, if the user doesn’t like it they can click the thumbs down. Through these ratings Pandora develops a library of music for the user based on the songs they have stated they like or don’t like. The benefit to signing up for a free account is that the user can then access the “stations” that are created from anywhere in the world. For example, I chose to have several stations, each that plays a different set of music. I have a classic rock station, rap, modern rock, techno, and funk/soul. All of these stations play music that I have chosen and pretty much stick to the genres that I want. There are some drawbacks. If I do not like the song I can skip past it, but a user can only skip past so many songs per hour before Pandora is not allowed to skip any further. Also there is a large amount of advertising on the site. The ads do not interrupt the music but the ads surround the screen and are very noticeable.

There are other pricing strategy is to offer a $36 per year subscription that offers certain services or features that do not come with the free account. This subscription is an example of a fixed bundling pricing strategy. In bundling, a company establishes prices for a combination of more than one product or service. On Pandora, a user can listen to music, look up information about the artist and about their songs, and check out other people’s profiles who listen to the same music. Pandora also offers a mobile phone application for those people with smart phones who wish to listen to their stations when not at a computer. All of these services are bundled together and offered for free at first, but then there is the subscription account that offers some services that the free account does not. These features include a 5 hour time out interval (the free account is 1 hour), no ads being placed on the stations, and no ads on the website or on mobile phone applications. This trade-up from the free to subscription service allows Pandora to charge an annual rate for convenience. People who do not wish to see ads or be bothered by them can pay to avoid them.

The internet radio industry has been increasing steadily since its introduction. A business like Pandora, which offers limited interruptions by advertisements, presents a much better product to people who are wishing to avoid the nuisance of radio and online radio. Companies like Pandora offer a greater listening service then their predecessors and current competitors. With regards to its pricing strategies, Pandora has done an excellent job in pricing its products and services. The free package allows users to enjoy the core service of Pandora, while the paid service allows users to ascertain many other services that provide a much better listening experience. Pandora is consistently ranked as one of the most popular internet radio sites and with good reason. In the future, Pandora will continue to grow and might alter its pricing strategy, however for now, the system it has is both effective and popular.