This is a huge reason why Pandora cares a whole lot more about free users (and massive size) than paid users (and profitability). And why the company is extremely reluctant to court more premium users at the expense of its massively dominant listener base.
First, here’s the latest data for the month of June, when Pandora introduced user caps on mobile listening based on royalty costs. The company admitted that the caps contributed to these slight declines.
1. Total listener hours:
1.25 billion hours
Up 17% over June, 2012.
Down 7.4% over May, 2013 (a surge month)
2. Share of total US radio listening (broadcast+online):
7.02 percent
Up 17.4% over June, 2012
Down 3.7% over May, 2013 (a surge month)
3. Active listeners:
71.1 million
Up 30% from June, 2012.
Up 0.4% from May, 2013
And here’s the very swift reaction on Wall Street.
So let’s see: Wall Street punishes Pandora for not being profitable. But it also punishes Pandora for the slightest loss of users (even if that loss is based on a shift towards higher-paying premium accounts). Which means less money for the investors and executives that are actively exiting and cashing out.
Any questions?
Pandora: dead by 2018.
from The New York Times:
“Tim Westergren recently sat in a Las Vegas penthouse suite, a glass of red wine in one hand and a truffle-infused Kobe beef burger in the other, courtesy of the investment bankers who were throwing a party to court him.”
http://www.nytimes.com/2010/03/08/technology/08pandora.html
Pandora refuses to say how much decrease they want in artist royalties
The Wall Street Journal
“The nature of any negotiation makes it unwise to discuss details publicly. We’ll save those specifics for conversations with SoundExchange and the CRB. Tim does, however, stand behind his statements that Pandora supports an outcome that would see absolute artist payments go up.”
http://allthingsd.com/20130701/pandora-says-musicians-will-get-more-if-it-pays-less-how-does-that-work/
I wonder if the drop in stock price has anything to do with the most recent discussions re: David Lowery, Pink Floyd, et al.
That, coupled with the recent suing party Pandora has been taking part in with the PROs, would spook me if I was an investor in the company.
I mean, isn’t it a red flag when they are in a seemingly never ending battle with their primary constituent base?
“Pandora’s PR problem: how the web radio titan became music’s big villain”
http://www.theverge.com/2013/7/9/4475102/pandroas-pr-problem-why-the-company-cant-win-in-washington