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Suppliers Should Not Subsidize Pandora

11-28-2012

Also testifying today will be Jeffrey Eisenach who is an adjunct professor at George Mason University law School and teaches a course on Regulated Industries. Eisenach will not be very supportive of Kennedy's push to lower rates in order for Pandora to become profitable sooner. In fact he will say quite the opposite. And he'll have some interesting facts. Eisenach says that while Pandora's content acquisition costs have indeed grown rapidly, they have not grown as rapidly as revenue has. He points out that while content acquisition is up 351%, revenue has increased 400% and overhead and administrative expenses are up 457%. And this is one of the reasons Pandora should not receive a break.

Eisenach will testify that Pandora has not yet achieved profitability is hardly a surprise. "Other successful online firms, including Facebook, Google, Vonage and many others, have taken years to achieve profitability; some have yet to do so. Firms compete in what is sometimes referred to as a land grab strategy to achieve critical scale. While it is typical for firms like Pandora to invest in customer acquisition for an initial period before becoming profitable, there is no economic or public policy rationale for forcing their suppliers to subsidize such strategies."



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