Pandora is an online music service that claims about half of the online radio market. Pandora Media Inc., has filed its initial prospectus with the Securities and Exchange Commission. This is the first step toward a Pandora IPO expected to raise about $100 million.
Pandora IPO filing
The initial filing with the Securities and Exchange Commission starts the process for a Pandora IPO. If approved by the SEC, Pandora would be allowed to sell stock in the company within the next six to eight months. Estimates are that Pandora would be able to raise about $100 million by selling stock in the company. After the IPO, Pandora, its library of 800,000 songs and Music Genome Project data would all become owned by stockholders.
The history of the Pandora IPO
Pandora has been around in one form or another since 2000. For five years, the company, called the Music Genome Project, categorized all the music it could get its hands on. The project hired musicians and had them record the form, fashion and style of thousands of groups. In 2005, Pandora started streaming music online, helping listeners find new music based on the music they already enjoyed. It took four years for the company to post a profit, and it now makes the majority of its money from advertising.
The financial hurdles for Pandora
The largest expense that the Pandora IPO hopes to raise money for is music licensing. More than 60 percent of the revenue Pandora brings in through advertising is currently spent on paying music licensing fees. Currently, only about 3 percent of Pandora users actually pay a membership fee. The other 97 percent of Pandora users listen to their 40 hours per month of free time on the service. There are several competitors that offer services similar to Pandora, but only Pandora has the data of the Music Genome Project behind it.