There are countless examples of ‘first to market’ not being a sustainable competitive advantage. Comparing the 2018 public offering of Spotify to Pandora’s original IPO in 2011 is a major example. Below are some excerpts from Pandora’s S1 (official IPO document filed with the SEC) that show its dominance at the time:
Pandora is the leader in internet radio in the United States…. In January 2011, we had over 80 million registered users and we added a new registered user every second on average. We have more than a 50% share of internet radio listening time among the top 20 stations and networks in the United States… Our revenue was $55.2 million and $90.1 million in fiscal 2010 and the nine months ended October 31, 2010, respectively… Clearly Pandora was the dominant player in streaming at the time. Funny enough, they even mention Spotify as a competitor, almost as an afterthought:
Our competitors include terrestrial radio providers such as CBS and Clear Channel, satellite radio providers such as Sirius XM, online radio providers such as iheartradio, Last.fm and Slacker Personal Radio, subscription online on-demand music providers such as RDIO and Rhapsody and potential U.S. market entrants like Spotify.
With a presence in 61 countries and territories and growing, our platform includes 159 million MAUs and 71 million Premium Subscribers as of December 31, 2017, which we believe is nearly double the scale of our closest competitor, Apple Music…. For the years ended December 31, 2015, 2016, and 2017, we generated €1,940 million, €2,952 million, and €4,090 million in revenue, respectively, representing a compound annual growth rate (“CAGR”) of 45%…. SIt’s clear first to market didn’t mean much in streaming music. I’m willing to bet that it doesn’t mean much in your industry either so if you’re a new player, don’t fear the big incumbents. If you’re an incumbent, innovate or die.
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