Pandora Files to Raise $100 Million in IPO

Let the floodgates open.

First it was LinkedIn, and now it is music-streaming service Pandora that has filed for an initial public offering.

In a document filed with the SEC today, the Oakland, Calif.-based company said it wants to raise $100 million. The underwriters are Morgan Stanley, J.P. Morgan, Stifel Nicolaus Weisel and William Blair & Company.

Pandora explained in the document that its service today is primarily a personalized radio station streamed over the Web and mobile phones, but in the future it has aspirations to do much more.

It wants to improve the service, develop new advertising products, build out its ad sales force, expand distribution to other consumer electronics and automobiles, and expand internationally. It also wants to add other types of content beyond music, such as radio formats, like talk radio or sports.

The company reported a loss of $328,000 on total revenues of $90.1 million in the nine months ended October 31, 2010. In the same period in 2009, it lost $18.6 million on revenues of $31.4 million.

A majority of its revenues comes from advertising, with a very small minority from subscriptions.

Pandora uses what it calls the Music Genome Project to draw correlations between different songs, so that when a user picks a particular station–based on an artist or a song–it finds the best matches to fit your taste, making the service insanely addictive.

The company’s tagline: “It’s a new kind of radio–stations that play only music you like.”

Generally, the advertising interruptions are limited, and subscriptions are available.

It hasn’t always been smooth sailing for the company, and has had to fight hard to keep down the royalty costs it must pay license holders. An IPO won’t put an end to those troubles, but it signals the company may be out of the woods.

The service has plenty of rivals, including companies like Rhapsody, and could be threatened by international competition from services like Spotify, which is still months out from entering the U.S.

In the filing, Pandora says the largest shareholders are Crosslink Capital, Walden Venture Capital, Greylock Partners, Labrador Ventures, the Hearst Corporation and GGV Capital.

Some other tidbits from the filing:

–80 million registered users in the U.S.

–800,000 songs from 80,000 artists in the collection.

–Streamed 3.9 billion hours in the fiscal year ended January 2011.


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