Here are their economics at a glance as detemined in my simple spreadsheet found in this google sheet.
Their fixed costs other than bandwidth and licensing music are about $20 million per year. Their band width costs are about $0.01 per hour streamed. Licensing costs are about 2/3 of a cent per hour. The average user listens for about 40 hours per year. If users would pay $0.10 per hour then Pandora would likely earn about $200 million based on current usage, which is increasing. I love the service and paying that amount would not reduce my use but might that of others. Many of their hours might be from high volume users who pay $36 per year, meaning that there are fewer hours to charge the $0.10. My conclusion is that the $4 billion valuation is high based on current revenue, but not unattainable. What is the cost of creating a copy cat? What would motivate switching. Stations are customized over time, creating weak lock in. I would rather own Pandora than Groupon shares.
No comments:
Post a Comment