Pandora Sucks at Making Money…

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Source: Pandora SEC filings. Written while listening to “About the Money” by T.I. (feat. Young Thug).

15 Responses

  1. Remi Swierczek

    Grammy is over, let’s wake up Mr. Grainge, the most powerful MAN in MUSIC BUSINESS.

    He can force with new Grammy created Creators Alliance or just hire all music ID services as a CASH REGISTERS of $100B MUSIC INDUSTRY.

    Pandora, next day, by accident will become $10B music store.

  2. Pandora pays too much

    You’re joking, right? Pandora is the best there is at making money in the digital music space. Pandora is the most widely used app for Android and iPhone in terms of time spent on Apps. Pandora plays more music in the U.S. than any other single service, including YouTube. And Pandora pays far more for the right to play that music (in proportion to their income) than any other single source, including iHeart, Sirius/XM, and Google.

    In terms of revenue, Pandora has climbed from nothing to generating $920 million per year, with $446 million of that paid to artists. 2013’s revenues were $638 million with $342 million paid to artists, and 2012’s revenues were $410 million with $248 million paid to artists. That’s more than $1 billion paid to artists in the past three years. Pandora has $749 million is assets, most of it in cash, and is currently adding $50 million per year to that cash position from its operations. The company now has 1,414 employees, up from 559 in 2012, and more than 350 of those employees are ad sales people, up significantly from two years ago. Pandora has built the best monetization team/process in digital music. They have 81.5 million active monthly users and 250+ million registered users. They are 9.7% of the radio market and growing, and 77.9% of the internet radio market.

    You can dog Pandora all you want, but you can’t say they suck at making money. At least, not without looking in the mirror. You and Tim Westergren took your respective Stanford degrees into the digital music space at about the same time. My guess is that Tim has made far more money than you and DMN in that time, and he has put far more money into the pockets of artists than you and DMN in that time.

      • Name2

        You’re literally putting millions of dollars and millions of listeners on the same chart (let alone the same scale).

        There’s just so much wrong there, I can’t even…

        PPTM is not afraid of the real numbers. DMN is.

      • Pandora pays too much

        By “scoreboard”, I assume you mean my comment and not your chart. I know Stanford is pass/fail, but I hope you paid enough attention in your econ classes to know that you should back out the $87 million in stock-based compensation from the $30 million “loss”. When you do that, you end up with a $57 million gain. Also, add back in the $15.4 million of depreciation and $14 million of “subscription return reserve” and P is profitable for the year (they were profitable for the quarter w/o the add backs).

        P looks just like a cable company did for their first three decades of operations. Just growing faster.

        • Paul Resnikoff

          The cable TV analogy is interesting, though there may be some critical differences in sunk costs. Indeed, Pandora – and any streaming internet company – faces some barriers in the form of initial upfront investment, but the real issue here is variable (and unpredictable) licensing costs. That’s why investors on Wall Street tanked the stock this week. Publishers and PROs are focusing a lot of energy on unraveling ancient statutes that essentially allow Pandora to remain afloat. If those change, Pandora’s entire cost structure could deteriorate.

          • Pandora pays too much

            The possible unpredictability of licensing costs was not cited by a single analyst that downgraded Pandora after this quarter. The actual reasons stated for downgrades were: increased competition from Apple and Google, and weaker than expected revenue numbers in the 4th quarter (~5% weaker). Pandora’s 4th quarter’s ad revenues were indeed lighter than analysts had projected, which was true for most internet/mobile businesses in the 4th quarter (see: Aol, Yahoo, even Google).

            It is true that Publishers are putting pressure on Congress to increase rates paid by Pandora, but it is not clear whether that will increase or decrease the rates Pandora will actually have to pay. Time will tell, but at this point, it is highly unlikely that the rates will be changed significantly enough to “deteriorate Pandora’s entire cost structure”.

            Pandora pays the fees the government fixed as “fair” compensation for Publishers and recording right owners. Whether you want to acknowledge it or not, Pandora is a critical piece of music’s future financial ecosystem. If all non-interactive listening occurred on Pandora, instead of on radio stations, music licensing revenue would increase to ~$5 billion per year and radio would no longer get a “free ride”. Pandora is the solution, not the problem.

          • Remi Swierczek

            You look like and you might be an insider. Ask time to start conversation with RIAA and labels (just UMG will do)
            to convert Radio, streaming or any place playing music to discovery based music store.

            Your Pandora holdings will quadruple overnight!

            All we need is to criminalize less than 50 music and lyrics ID services and convert them to gold plated cash registers of $100B+ music industry.

          • PPTM

            I have read your idea several hundred times. You have a few problems that make your idea unworkable, ever.

            1. the model probably won’t work: 2. even if the model would work, there is nobody to pay the bill to implement it (no label would pay to develop it, but each will charge you for the privilege of allowing you to build it); 3. music discovery services like Shazam and SoundHound are legal and there is no way to force them to implement your system; 4. only a very small percentage of people buy music downloads and that number is not growing; 5. you would need to decrease the price of each download in order to get customer buy-in (no major will allow this, period, full stop); 6. you will not be able to raise any money (no VC will invest in a music-related service that requires licensing); and 7. you don’t have an experienced, proven start-up team ready to go (it is almost impossible to recruit anybody (worth having) to a music start-up because the odds of success are so bad).

  3. David Lowery

    My band made 31 million dollars more than Pandora last year.

    • Gwiz

      Wait. That can’t be right. I thought Google and streaming services were decimating your ability to be “sustainable” (whatever that means). I pictured you selling your amps to buy Ramen noodles from the stories posted on The Trichordist.

      I guess the Music Coalition Survey that showed that 95% of Pop/Rock musicians make approximately 75% of their income from sources that don’t involve copyright was pretty close, huh?

      • david lowery

        My english aunt once told me that I was “involved in a dangerous business.” I kept trying to explain to her that touring and playing rock music wasn’t as bad as she may have heard. You know assuming she was worried about the sex and drugs stuff. Finally exasperated she says:

        “I’m not talking about sex and drugs, I’m talking about using irony in America”

        • Gwiz

          I’m talking about using irony in America”

          Maybe she was talking about using poor irony. Buy, hey, it’s possible the mistake was mine – I’ve gotten so used to you cherry-picking one small portion of the overall picture of a musician’s income and declaring that the sky is falling and the world is ending that my irony-meter gets a little screwy whenever you speak.