The Future Sucks Very Badly for Pandora, Morgan Stanley Says…

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Pandora is extremely unlikely to reach profitability any time soon, and may need hundreds of millions of dollars just to survive the next few years, according to a just-released Morgan Stanley assessment.

In the analyst report, issued this morning, Morgan Stanley analyst Benjamin Swinburne outlined a number of bad, really bad, and seriously f*&king bad outcomes for Pandora, depending on how the royalty winds blow.

“Our gut is despite the rhetoric, labels do not want its $450 million (and growing) royalties to go away – so direct deals may result if the CRB ruling is onerous.”

The most critical of these will come from the Copyright Royalty Board (CRB), which is currently deliberating Pandora’s financial fate and considering possible increases.  According to Swinburne, that could quite easily result in a 5 percent annual increase in 2016, and another 5 percent bump heading in 2017, all of which would force Pandora to seek “up to $350 million” in financing just to stay afloat until 2021.

Swinburne also sees Pandora’s stock getting beat down into the $2-3 range during that desperate period.  As of midday Monday, Pandora (P) is trading just above $17, with top executives continuing to cash out heavily.

Ironically, Morgan Stanley was the lead underwriter on Pandora’s IPO, a soggy cake that is now being forced down Spotify’s throat.  Meanwhile, major publishers are pushing extremely hard to structure direct, more lucrative deals with Pandora, with the US Department of Justice recently indicating a willingness to relax rules that currently prevent those agreements.  In that soup, Swinburne notes that an “onerous CRB decision” could force Pandora to structure direct deals just to survive, and simply secure the ‘least worst’ financial obligation.

“With no CRB visibility, top-line trends drive our view.”

Image by ‘Captain Smurf,’ licensed under Creative Commons 2.0 Attribution Generic (CC by 2.0).

12 Responses

  1. so

    Those artists who want to see Pandora go down derive little to no income from it. Those of us who count it as 10% to 15% of our total income each year know that if Pandora disappeared, that money would not be replaced. Pandora is spinning thousands of artists who have absolutely zero shot at terrestrial and pop digital radio, yet have found a following on their service. Although it pays about one-fifth of what Spotify pays, for many of us, it is essentially found money.

  2. Anonymous

    This is all “ifs” and “maybes.” No one knows what the 2016 royalty will be. It could go up. It could also go down or stay flat.

    This “If Pandora dies everything will be great” mentality many around here have though is seriously twisted. Pandora pays a substantial amount of money every year. Where is that money going to come from if not from Pandora?

      • Realist


        Where is that money going to come from if not from Pandora?



        Actual music sales?


        Funniest DMN comeback yet!!!!

        Man, that’s even funnier than that “Remi Swierczek” stuff!!!!!!


  3. Paul Resnikoff

    Morgan Stanley isn’t rooting for Pandora to die. After all, they led the IPO. But they are looking out for their clients, and helping them make an accurate forecast on how this company will fare, esp. as it relates to its stock.

  4. Remi Swierczek

    GODDAMN! Just convert it primitive music store.
    $5B US revenues in less then 5 years!

  5. FarePlay

    The single play per listener model is a financial disaster for all involved. Forget the scale fantasy, it only drives more debt. There is no viable business model there. They might as well be selling credit default swaps.

    The amount of money syphoned off from this failing business is a cautionary tale as to the underlying motives of the investors. The music that is used to turn the wheels and perpetuate the illusion of having a business is simply grist for the mill.

  6. Chris H

    Well, they just added Roger Faxon to the board, so that has to keep some people happy. Even though he just presided over the breakup and devaluation of Capitol to it’s present collection of nuts and bolts.

    • FarePlay

      Not to mention signing off on the Spotify Deal. He’s post Telecommunications Act, so he’s coming in as huge parts of the music business are being torn off.

  7. Pro Pandora

    Pandora is one of the best things to happen to the music industry lately. Especially for artists that don’t stand a chance in hell of getting terrestrial radio AirPlay. Besides pandora has a bigger playlist than terrestrial. Pandora must start charging everyone for its service. Have a tiered service if you must but Stop giving it away! Netflix has 50 million subscribers and charges for its service. If you do the math it sounds like Netflix has a sustainable business. Pandora needs to charge, no question. Otherwise we will continue to hear the sky is falling.