MRE Assets

1. January 25, 2008 Michael Chen | Rahul Deedwania | Elaine Ho MRE Assets

2. Pandora: Personalized Music Experience “We have a single mission: To play music you’ll love – and nothing else.” 1) STEP 1: Enter artist or song title STEP 2: The entry is analyzed on 400 distinct musical characteristics STEP 3: Similar songs are played on newly formed station 3) 2) Background| Market | Competition | Business Model | Financials | Exit Strategy

3. Additional Features Numerous features promise maximum user satisfaction. • Links to buy music that you heard on your station • Make friends with other Pandora users 100 new “finely tuned genre stations” • Put the service on a phone, or in your car/home Background| Market | Competition | Business Model | Financials | Exit Strategy

4. Management & Investors Joe Kennedy CEO & President • President and COO, E-LOAN • VP of Sales, Service, and Marketing, Saturn Corporation Tim Westergren CSO & Founder • Award-winning composer, musician, record producer • Recorded with independent labels, managed artists, owned studio • Scored feature films, produced albums Tom Conrad CTO • VP of Engineering, Kenamea, Inc. • Technical Director, Berkeley Systems • Principal Engineer, Relevance Technologies Etienne Handman COO • CIO, E-LOAN • VP of Technology, Oberthur Card Systems • VP of Operations, De La Rue Nolan Gasser Chief Musicologist • Artistic Director, Classical Archives (largest classical music site) • Ph.D in Musicology, Stanford University Experienced management team leads to Pandora’s current and future success. InvestorsCrosslink Capital, Peter Gotcher, Robert Kavner, Labrador Ventures, Walden VC, Selby Venture Background| Market | Competition | Business Model | Financials | Exit Strategy

5. Market Data and Trends Percent Online Radio Listeners of United States, Age 14+ 71% 45.4% 29% 55.6% 2007 2012 Growing popularity of internet radio ensures high profit potential. Pandora: Market Share 240.4 Million People Ages 14+* 29% Stream Online Audiot (Estimated Projections) 69.7 Million Potential Listeners 664% Growth Potential Source: Mintel, Pandora $ 36 Subscription Fee x 69.7M Potential Subscribers $ 2.51 Billion Potential Market *Source: CIA World Fact Book – July 2007 Background |Market | Competition | Business Model | Financials | Exit Strategy

6. Competitive Positioning Free or low cost subscription option Free orsubscription option Charge per song purchased Full CD purchase New songs recommended based on expert analysis; links to buy songs on other sites Non-customized music, select providers will link to similar artists Songs on demand, search may provide similar artists Provides only purchased music Returning customers due to consistent new content and 7 years of establishment Inconsistent because users float between preset radio stations Easy to purchase music from any provider Dependent on loyalty to artist 7 year old database of personally analyzed music;Patented search algorithm Small product differentiation Several sites available (i.e. Amazon, iTunes, Napster) Copyright, easily open to infringement Good Poor Pandora’s industry offers the most cost-attractive and convenient way to listen to music. Streaming Radio Stations Digital Audio Downloads CDs Cost Quality of Service Loyalty (Fan Base) Duplicability Background | Market | Competition| Business Model | Financials | Exit Strategy

7. Competitor Analysis • Limited usage of “Next • Track” option • No song search capability Personalized Radio Pandora beats its strongest competitors across all industries. Type Advantages Disadvantages • Individual song analysis • Free to use online • User friendly interface • Portable option • Complex user interface • Recommendations requires • software download • Radio based on genre • Widespread use • Social networking User Radio • Preset stations only • Subscription fee • Stations don’t play desired • music Streaming Radio • Brand-name recognition • Portable • Cost per individual song • Many alternatives • Only accessible for credit • card holders • Portable • Song search capability Digital Downloads Background | Market | Competition| Business Model | Financials | Exit Strategy

8. User Acquisition • Viral Growth • Word of mouth • Personalized emails • Blogs, Facebook • Partnerships • Amazon, iTunes • Mobile Services • Sonos, other devices • Search Marketing • Go after music lovers • Cater ads to market • Direct Advertising • Music forums • Distribution Partners • Lead generation/Affinity • Groups • Fan clubs, concerts, • Ticketmaster • Go International • Obtain cross-border • licenses • Expand service to include • international music • Set up stations abroad • New Products • Pandora independent of • computers • Distribute on other networks • Continue to expand database Expansion opportunities: Offer more products to more people in more places. Current Method Expansion Plans Background | Market | Competition| Business Model | Financials | Exit Strategy

9. Business Model Multiple revenue streams guarantee continuously increasing earnings. User Methods Partnering Platforms Ad Partners Annual subscriptions to Pandora Mobile devices Home entertainment systems Car radios Advertisements on Pandora Advertising revenue Subscription revenue Expansion Outlook Increased subscription revenue + High scalability = High profit potential Background | Market | Competition | Business Model | Financials | Exit Strategy

10. Financial Projections • Expanding user base • Increasing user referrals • Growing subscription • rates Pandora begins to expend resources on advertising, resulting in: Revenue by Source 200720082009201020112012 200720082009201020112012 Advertisements Subscriptions 500% growth in user base over 5 years increases revenue over tenfold. Expected Financials Revenue and EBIT Background | Market | Competition | Business Model | Financials| Exit Strategy

11. Exit Strategy Broadcasting Companies Media Players Online Radio Stations Incorporates Pandora’s loyal listener community into specific broadcasting networks. Allows users to easily discover new music and download directly into media players, producing increased profits. Transforms impersonalized radio service into one that caters to specific user preferences, expanding user base. • Clear Channel • Cumulus Broadcasting • Citadel Broadcasting • Apple iTunes • Amazon MP3 • Napster • MSN Radio • AOL Radio • Yahoo! Music Initial Public Offering • Goal: Expand existing market base and revenue model in order to obtain financial and strategic position as excellent investment opportunity for public market investors. Acquirers attracted by Pandora’s loyal user base and a high expected ROI. Potential Acquirers Background | Market | Competition | Business Model | Financials | Exit Strategy

12. Q & A Index Company Overview Additional Features Management Team & Investors Market Data & Trends Competitive Positioning Competitor Analysis User Acquisition Business Model Financial Projections Exit Strategy Appendix Risks & Precautions External Factors Financial Calculations Revenue Calculations Expense Calculations Market Data Sirius Financials XM Financials Market Trend Calculations Sources

13. Risks and Precautions Risks Precautions New competitors Develop name recognition through unique product offering; competitors unlikely to offer better product Lack of user interest Develop user community through social networks and forums; emphasize mobile applications Existing competitors adding similar features Technology patents secured; effect of Pandora’s music-analysis difficult to duplicate digitally Decreasing user base Current user base is strong and growing quickly; integrate other advertising mediums

14. External Factors People continue to consume music online (more inline than offline) due to fast lifestyles and culture. Increase in Online Trend CD players increasingly seen as bulky and inefficient in comparison to online music. Decrease in CD Purchases Increase in Music Downloads People prefer instant access and ease of getting music virtually. Increase in Use of Online Radio Music trend to digital – plays into Pandora’s business model. Increase in Popularity and Use of Pandora

15. Financial Calculations

16. Revenue Calculations • Revenue Calculations (all numbers are averages) • Benchmark of $14 million in 2007 • CPM $10-50 based on type of advertising package • Users go on 2-3 times per week for 2-3 hours Increase in user acquisition rate based on continuation of viral growth and implementation of direct advertising and new products. Revenue sources divert from advertisements to subscriptions. While ad revenue continues to rise, its rate of growth decreases as number of users increases. Percent of Overall Revenue for Each Source in a Given Year

17. Expense Calculations Personnel Expenses - 2008 Sales and Marketing As EBIT increases over years, so do salaries (considering bonuses and pay raises). Proportion of revenue dedicated to advertising increases for better direct marketing. • Royalty and Licensing • Starts at benchmark of $6million for 2007 • Increases steadily as number of artists and users in network increases

18. Market Data • Subscription revenues are valued by music stores because they generally offer higher margins and the promise of recurring revenue. They also offer consumers the ability to explore a wide range of music • Only streaming music content is widespread enough to have a significant penetration in over-65s • Almost one in three respondents report using some streaming technology to listen to music online • The small number of respondents who download songs directly to cell phones amount to a third of those who download via PC, emphasizing the growing importance of wireless technology and alliances between online retailers and wireless service providers • Current 10.5 million users and growing at 15,000/day Source: Mintel

19. Sirius Financials SIRIUS SATELLITE RADIO INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS(In thousands, except per share amounts) For the Years Ended December 31, 2005 2004 2003 Source: http://www.secinfo.com/dsvRa.v131.htm#9qfol

20. XM Financials XM SATELLITE RADIO HOLDINGS INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS Years Ended December 31, 2005 2004 2006 Source: http://www.secinfo.com/d14D5a.u1BAk.htm#ku6h

21. Market Trend Calculations 29% of US Population 14+ uses Streaming Audio† ÷ 75.7% of US Population 14+ uses the Internet † † 39% of Internet users use Streaming Audio Base: 24,438 adults †: Source: Mintel † †: Source: Mintel, CIA World Factbook

22. Market Trend Calculations (Cont.) 37.56% Increase of Broadband users increase per year 39% of Internet users use Streaming Audio x 37.56% Increase of Broadband users increase per year 14.5% of Internet users use Streaming Audio

23. Special Thanks and Sources • Cheryl Lucanegro, VP of Sales, Pandora Media, Inc. • International Telecommunications Union/World Bank/Trade • Sources/Euromonitor International • Mike Zappert, 3i • US Census • www.ciaworldfactbook.gov • www.mintel.com • www.pandora.com • www.secinfo.com • www.sirius.com • www.techcrunch.com/tag/pandora/ • www.xmradio.com