Pandora Music Pandora Radio was launched in 2000 under the name of Savage Beast Technologies. The idea was essentially the same as it has always been: to offer users a personalized listening experience with music that was in line with their tastes and preferences. After running into funding issues, the company re-launched itself in 2004 as an ad-based free streaming music radio site that still used the customized radio model to attract listeners. The idea clicked with listeners and by 2011, the company went public on the New York Stock Exchange. By 2013, it had 200 million users, about 70 million of whom were active monthly listeners. Pandora attracted listeners via its free ad-supported customized content but also gave listeners the option of paying a fee to listen without commercial interruptions. This paper will discuss how Pandora used the Internet to become a disruptive innovator in the music industry by offering consumers their own tailor-made radio stations.

As Steve Jones notes, “whereas before the Internet, music was marketed and promoted to an audience in a closed loop primarily between record companies and radio stations, by the 2000s there was clearly no longer any such loop” (441). The breaking of this loop, thanks to the Internet, allowed Pandora to become a game changer in terms of the way the music industry had to think about music and the utility of music in the Digital Era—the Information Age—the Age of Social Media. Digital content was screaming across the World Wide Web, digital files being shared by music lovers on social media platforms, and now Pandora had come along to revolutionize that concept of music distribution. Pandora’s disruptive innovation challenged the once “secure system for payments for performances” (Jones 441). Now that system had to be redesigned, with new deals inked to secure for artists the just rewards of their contributions. Performance rights organizations had overseen that aspect of the industry in the past—Broadcast Music, Inc. (BMI), the American Society of Composers and Publishers (ASCAP) and so on—but when the Internet arrived to create a new venue for file sharing and streaming, none of these organizations had “a mechanism for tracking streaming music or other online performances and collecting royalties,”—and the kicker was that those who were offering music online were under no legal obligation to pay royalties...

In the early days of the 1990s, the Internet was still the Wild West frontier in the early days: the problem of monetizing businesses and making sure content was not stolen or Intellectual Property ripped off was now something that had to be solved. The Digital Performance in Sound Recordings Act was passed in 1995 and the Digital Millennium Copyright Act was passed in 1998.
However, the power of the music industry was now in the hands of the consumer. New media—i.e., the Internet—made the consumer the new arbiter of what would be passable and what would not. The consumer would get to pick and choose which new star would shine and which would not. The consumer was at the controls—and social media was the method by which those controls would be used. Indie stars like Macklemore and Ryan Lewis would catapult to the top of the charts virtually outside the industry system—thanks to the power of the music streaming services.

Pandora allowed the way people came to know music to be revamped. Instead of having to rely on the industry’s radio systems to get content delivered, users could modify their own accounts and set their tastes, enjoy hearing new music in the genre of their preference and come to know new artists they had never heard before. In this way, Pandora was a truly disruptive company. Christensen, Raynor and McDonald describe disruption as a “process whereby a smaller company with fewer resources is able to successfully challenge established incumbent businesses.” What Pandora was able to achieve was thanks to the Internet and its democratizing qualities. As Bhargava and Klat have pointed out, “the growth of digital content, and especially paid digital content, is driving the growth of the creative sectors” (8) all over the world. But really the Internet has only been part of the story. The other part has been the revolutionary, innovative technology to come along that could connect people with platforms like Pandora over the Internet through mobile devices—the iPhone, the Android, the tablet and iPad and so on. The ability for people to connect to the World Wide Web while being on the go was the other development that gave Pandora its ability to truly disrupt the music industry and change the way people think of getting access to music. Without iPhones in everyone’s pocket, the Internet had less utility: one would have to…