Pandora Radio: Fire Unprofitable Customers Harvard Case Solution & Analysis

Introduction
Pandora Radio is a company that streams songs online in United States, it is an online internet radio broadcaster on the website Pandora.com. The company has been operating effectively in the market with over 600,000 songs in the library with 16 million registered users.
Also, the company has 1.8 million active daily users that listen to the radio on an average of 2-3 hours daily. But, given that company has been operating on net losses because of fixed costs, increasing variable costs, and royalty fees as well.
So, company has been facing numerous issues in the market due to the rising costs of doing businesses and it could not meet with the costs associated with the webcasting of songs 24 hours 7 days a week. Since, it is famous as an online radio broadcaster and operates as one of the biggest online radio through Pandora.com.
The major issues of the company are negative cash flows since its inception and an unclear business model and neither of these issues areprofit oriented. Therefore, on the operational side it has been facing the costs of doing business because it could not meet with operational costs i.e. broadcasting the songs online.
Pandora Radio Fire Unprofitable Customers Harvard Case Solution & Analysis

Furthermore, it has been in conflict with the copyright royalty board who has asked for the fees that is much higher than expected or and then industry benchmark. Thus, it has to come up with some innovation and disruptive approach to the market to tackle the potential threats that company has been facing in the market.
On the other hand, the testing of subscription model has also failed since the users used 10 free hours monthly and then left and did nothing. So, the subscription model failed given in that case. However, company has to draw a model based on the revenues and services oriented in such a way that it does not lose the customer base and make revenues to support its operations.
The company has 16 million registered users and has over 65 million stations created. Since, each listener is more expensive to the company then it has been earning on each listener. Therefore, company has to create such a business model that should increase the advertisement to boost the revenues or should it go with the freemium web 2.0 conceptand should implement subscription model for each user of the radio.
Question 1
Challenges and Issues
• Costs of doing business is not covered by revenues generated by the company.
• Company has negative cash flows.
• Cost of streaming more than company earns.
• 9% of users are more expensive to the company.
• Business model of the company is not clear.
• Battle with the copyright royalty board regarding fees.
• Failure of subscription model.
• The leaky faucet problemoccurs because users left the radio on all days, even they were not listening and it was costing more to the company to manage due to live streaming and company has to pay royalty fees to Sound Exchange.
• Lack of advertisement.
• Need for funds................

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