One Danish billionaire, several close-knit businessmen and a giant upstart from Oakland.

This article takes a close look at story of how Pandora came to buy Rdio, and the characters involved. Billboard has also taken a close look at the financial winners and losers of Rdio's bankruptcy, which was imposed on the company as a condition of Pandora's purchase.

Pandora has established itself, at least in the U.S., Australia and New Zealand where it's available, as "the Kleenex" of internet radio, inextricable from the idea of streaming free music, all of a piece, with some ads, based on a suggestion. Pandora will, any day (or minute) now, announce the launch of a new subscription service that will put it in direct competition with Spotify, Apple Music, Google Play, Tidal -- primarily those first two in the minds of most, let's be honest -- and the rest of a crowded field of music streaming companies.

Pandora started on this road less than a year ago, when it prompted the bankruptcy of Rdio, a streaming service well-liked for its features and interface, founded by the entrepreneur Janus Friis in 2008 and launched in 2010. Rdio's bankruptcy, filed on Nov. 16, 2015, was part of an amicable takeover by Pandora of Rdio's constituent parts, which it planned to use as the foundation for the streaming service currently about to launch. Because Pandora required Rdio to file for bankruptcy before it paid for any of its assets, we now have a good idea of how the whole thing came together, a peek at how international tech ventures are structured, and what the inside of a small, and failing, streaming service looks like from the inside.

Pandora Kicks the Tires

Prior to and during Pandora's due diligence of Rdio, the company operated in 86 countries, and like most streaming services charged $9.99 per month, along with free ad-supported listening and lower price tiers with more limited listening features. From this it was making about $1.5 million per month, mostly from subscriptions, although $100-150,000 of that monthly revenue came from the ads on its free tier. For its trouble, Rdio's expenses were about $3.5-4 million a month, mostly in payroll, meaning the company was losing about $2 million a month. Not a great business, frankly.

Because of this, Rdio has $188.5 million in secured debt and $24.3 million in unsecured debt, along with hundreds of thousands in outstanding tax and payroll bills. As its bankruptcy filing says: "Despite the investment of several hundred million dollars and years of efforts to build its subscriber base (and to attract meaningful advertising dollars), the Debtor [that's Rdio] was unable to achieve profitability -- or even to reduce its operating losses to tolerable levels."

Initially, Rdio's majority shareholder -- a company named Pulser, which had the same CEO, Andrew Larner, as Rdio at the time -- had sought new capital via equity or new loans by hiring Moelis & Company to investigate in the fall of 2014 (Larner had since left Rdio). There were no takers. With its debt quickly becoming terminal, Pulser told Moelis to try and find a buyer for Rdio instead.

Out of "over 110 financially significant potential investors or purchasers," Pandora was the clear leader in this search as of June, 2015, and the company submitted a preliminary letter of intent to purchase Rdio's assets on July 8, 2015, as Moelis continued to court other possible buyers. Both Pandora and Rdio, after a period that saw negotiations break down "several times," agreed to a non-binding letter of intent several months later, on September 29, 2015.

Pandora, which said it had 125 people working on the due diligence of its acquisition, was a hard negotiator. Throughout, even up to the point where Pandora had agreed to pay $75 million for Rdio and $2.5 million for Rdio employees to work on the transition process. Throughout, up until the final moments, Rdio "never understood the logic of Pandora’s decision to close the Rdio service, and was never sure whether Pandora might not ultimately change its mind again before the sale closed." A judge approved the deal on Nov. 23, 2015. Nope: Pandora only wanted engineers and the core technology. It was a good fit for Pandora's plans, as we now know. "As compared to Pandora’s music service, the Debtor’s service involved more specific (personalized) customer choice and a tiered-priced subscription service."

Merry Christmas: The sale closed just over a month after the bankruptcy was declared, on Dec. 23, 2015.

Janus Friis, Pulser, Iconical and Rdio

Now, for the high-flying world of international technology investment. Most of Rdio was majority-owned by a company named Pulser, which in turn was majority-owned by a company named Iconical Investments LP. Both Pulser and Iconical trace back to Janus Friis, the Danish high school dropout and billionaire co-founder of Skype. Iconical is Friis' main investment arm, which he runs along with Mark Dyne and Murray Markiles.

Friis sat on the board of Rdio alongside former Microsoft executive Anthony Bay, former Spyglass Entertainment executive vice president Andrew Larner and his Iconical co-director Mark Dyne. Starting in 2009, Larner served as Rdio's CEO through November of 2013, emerging halfway through 2014 as a co-founder of The Factory, a tech incubator in San Francisco financed by a subsidiary of Iconical. Meanwhile, Anthony Bay was appointed to lead Rdio as CEO in early 2014. (He would, as a result of its bankruptcy, be accused of fraud by Sony Music over Rdio's sale to Pandora. That case has since been settled.)

Got all that?

After

A week-and-a-half ago, Pandora revealed a rough timeline for the new on-demand streaming product that it has built from Rdio's constituent parts, saying the service will launch this year (another well-placed source told Billboard that the launch had been pushed to January).

The emphasis, CEO Tim Westergren told Billboard when he announced Pandora Pulse (a rebranded, slightly more clever, version of their Pandora One ad-free subscription), will be on helping listeners find what they want to hear. This is what every streaming service is trying to do, with vastly varying degrees of success. Apple has focused on its Beats 1 radio station and playlists hand-picked by a vast team of editors. Spotify has leaned heavily on the resources it bought with The Echo Nest, and products that have come from that purchases, like Discover Weekly, have been well-received. Before it went under, Rdio was well-liked for its social-driven playlists. For its part, Pandora has over a decade of listening data, in addition to the musical analysis it conducted with the Music Genome Project.

Whatever form it takes, numbers released last week by the Recording Industry Association of America seemed to indicate that there are plenty of customers to go around in the streaming industry. (For now.)

Go here to read the full, 147-page proposal.