[jcampbell1]

This makes sense. Another way to back into the figure:

Pandora spent $82M on content according to the most recent 10Q, with 4.18B listener hours. That implies a cost of $0.02 cents per listener hour. A million plays is roughly 62500 listener hours, which implies a content cost of $1250.

[arantius]

Sorry but ..

"$0.02 cents"? Do you mean "$0.02", or "2 cents" or two hundredths of one cent, or something else?

Is this Verizon writing? ( http://verizonmath.blogspot.com/2006/12/verizon-doesnt-know-... )

[jcampbell1]

I meant $0.02, aka 2 cents.

Sorry about that. It is an easy mistake to make at 2pm in the morning.

[_j5l3]

Do you mean...2 am?

[cloverich]

And... that was the joke :)

[hohead]

Interesting analysis.

Based on their cost of $0.02 cents per listener hour, I wanted to calculate how many hours per day my $36 yearly payment equates to (ignoring their operational costs):

($36 / $0.02) = 1800 hours per year

1800 hours per year = 4.93 hours per day

[sliverstorm]

Sounds like the pricing structure all works together very well, then. 5 hours per day sounds like a good point which plenty of people can easily eclipse, but the majority will not, keeping the service profitable.

[Retric]

Licencing is hardly there only cost.

[sliverstorm]

Yes, but they said it was 50% of revenues. I believe Pandora is profitable, so the sum of all other costs must be less. This means that the breakeven point is actually somewhere between 2.5-5 hours. 5 hours per day is not a magic number- I think 4 or 3 also sound perfectly fine, based on the usage patterns I see.

[spullara]

Pandora is actually operating at quite a big loss:

http://finance.yahoo.com/q?s=P&ql=1

[tsotha]

I don't see much value in an analysis that ignores operational costs.