Supplement | HBS Case Collection | May 2010

Tim Westergren of Pandora Radio

by Willy C. Shih and Halle Alicia Tecco

Abstract

Pandora Radio is at a crossroads. Founder Tim Westergren has just been told by a well known VC to get rid of his unprofitable customers in order to get his costs down, but Westergren is not sure that such actions are consistent with his company's business model. Pandora Radio is the largest Internet music stream site, and its rapidly growing user base loves the free customizable music stream under an advertising supported model. Pandora has to pay royalties for every song streamed, and has other variable costs that scale linearly with hours consumed, but it has taken no steps to restrict the amount of usage among its heaviest and most loyal users. Can Pandora make its model work when a significant percentage of its users cause it to lose money? This 9:45 minute video may be used to debrief the case; Westergren recounts some of the history and key issues facing the company, and details the outcome of limiting their top users.

Keywords: History; Business Model; Customers; Venture Capital; Internet; Cost Management; Outcome or Result; Customization and Personalization; Growth and Development Strategy; Music Industry;

Citation:

Shih, Willy C., and Halle Alicia Tecco. "Tim Westergren of Pandora Radio." Harvard Business School Video Supplement 610-714, May 2010.