February 18, 2011 at 9:30 am

Pandora Claims Over 30 Million Monthly Listeners as IPO Approaches

Tim Westergren demonstrates Pandora in the car to the author at the Consumer Electronics Show in Las Vegas last month.

Pandora announced last month that it has registered over 80 million users since chief strategy officer Tim Westergren, right, founded the company slightly over a decade ago. That’s a lot of people, considering that Pandora is only available in the United States, with a population of about 307 million.

But how many of those accounts are active? In other words, how many of the people who have ever registered for Pandora still listen to it?

Pandora spokeswoman Deborah Roth told Evolver.fm that as of January 2011, over 30 million people were “active users” of Pandora, meaning that they listen to it on one platform or another at least once per month.

On one hand, this means that the majority of the 80 million people who Pandora claims have registered have stopped listening.

On the other, it means that approximately one out of every ten Americans is a regular Pandora user (or perhaps slightly less, given that some listen from elsewhere), and that’s counting those without internet access. By that measure, 30 million monthly users is quite a high number indeed.

Having weathered a royalty battle that nearly drove Pandora out of business — in part by convincing over 1.7 million of its users to contact their Congressional representatives — the company now prepares for an IPO valued at up to $100 million, even as profitability remains somewhat elusive.

Pandora notes in its S-1 form to potential investors that even though the post-protest royalty rates are sustainable, or at least close to it, they increase proportionally with the company’s user base. This creates a challenge for its sustained expansion, which is how Pandora says it expects to return profits for investors:

“A key element of our strategy is to aggressively increase the number of listeners and listener hours to increase our market penetration. However, as our number of listener hours increases, the royalties we pay for content acquisition also increase. We have not in the past generated, and may not in the future generate, sufficient revenue from the sale of advertising and subscriptions to offset such royalty expenses.”

Pandora has been profitable in at least one quarter to date, and smartphone adoption has been kind to the company, doubling its audience according to Westergren. He sees the car as the next frontier for Pandora’s continued expansion into the mainstream. And the cash infusion Pandora is about to receive should be enough to power that expansion past the smartphone, to the television, car, and for all we know, the refrigerator and toaster.

As the company’s S-1 form indicates, there’s no guarantee that Pandora will achieve permanent profitability, but it has already succeeded in another sense. By attracting over 30 million regular users who listened for over five billion hours last quarter, this digital music company has paid copyright holders, including artists, over $100 million since 2007, proving that it’s possible to make interactive radio pay — for someone, at least.