Pandora Case Freemium Business Model


PandoraCase: Freemium Business Model

PandoraCase: Freemium Business Model

Themain difference between Pandora’s original business model and thecurrent model is that the former is a premium subscription businessmodel while the latter is a freemium. The original business modelrelied on revenue from the subscriptions from customers who pay tolisten to music on the internet radio. The current business modelhowever has two sources of income the subscriptions and theadvertisements from online advertisers. The difference betweenfreemiun and premium is that the former gives users a free service,limited to a certain level beyond which users pay to continuelistening (Christensen, 2015). However, premium model requires theuser to pay for the service with no free subscription option.

Pandoraoffers the customer value proposition of listening to music free ofcharge and enjoy the product before paying. By allowing the customerto enjoy the music for 40 hours, the internet radio creates a senseof value for the product that he or she should pay for.

TheMail Chimp succeeded with the freemium business model because it wasoffering a service that creates a value proposition to the customer.The company also supports the customers by giving services that helpreduce cases of spam emails as well as estimating market trends forthe customer. On the other hand, Ning failed because it failed tocreate a clear value proposition for the customers on the freemiummodel.

Whendesigning a freemium model, the first consideration is the valuebeing given to the customer for free. According to Seufert (2014),the value should be considerable to the free subscriber, but not aloss for the company. In addition, the free subscription should besupplemented by an alternative source of revenue, such asadvertisements. Moreover, the subscriber should be given friendlyoptions after the expiry of the free service. These considerationswill make the freemium model an option that leads to sales and not tosubscriptions only.


Christensen,J. (2015). DigitalBusiness: in The Digital Age. SanFrancisco: BoD Publishers

Seufert,E.B. (2014). FreemiumEconomics: Leveraging Analytics and User Segmentation to DriveRevenue.Boston:MorganKaufmann Elsevier