Pandora CEO Intends To Turn a Profit, But Doesn’t Explain How

Pandora CEO Intends To Turn a Profit, But Doesn't Explain How

Pandora CEO Tim Westergren (center) appears at SF Musictech Summit.  Corey Denis (CC by 2.0)

In a new interview with CNBC, Pandora CEO Tim Westergren shared how the company will make a profit.

Step 1: Get subscribers.

Step 2: ?

Step 3: Profit!

In 2015, Pandora reported a heavy loss of $170 million.  Last year, that number more than doubled.  The streamer lost $343 million.  In total, the company lost $513 million in two years.

SiriusXM walked away from acquisition talks, calling the company’s stock “overvalued.”  Earlier this year, Pandora cut 7% of its workforce.  Yet, according to CEO Tim Westergren, 2017 will be the year the company posts a profit.

On CNBC’s Squawk Alley, Tim Westergren said, “We intend to be profitable this year.”

However, he avoided answering questions about whether the company was for sale.  Instead, he told Squawk Alley that the company has faced viability standing questions before.  The company, according to Westergren, beat out radio offerings from top tech giants, and still continues unchallenged.

“We’ve seen this movie before, 10, 11 years ago when we launched internet radio.  A lot of folks said the same thing – AOL, Microsoft, Yahoo had large personalized radio products with big distribution.   But we built a much better product, and here we are years later the king of that category.  We just think we’ve seen this before.”

Going further, rival streaming services aren’t worrying Westergren.  Taking a swipe at competitors, he claims that Amazon and Apple have yet to offer a true premium product.  In fact, he boasted that Pandora Premium offers listeners what they really need.

“I am confident about our ability in this space.  These are early days in the subscription of music.  And listeners don’t know what a real premium product looks like yet, and that’s what Pandora is.

Pandora launched its premium service on Monday.  However, taking a closer look, the company’s premium features appear awfully similar to its competitors.  Apple Music and Spotify both offer “smart playlists”.  Its touted ‘My Thumbs Up’ feature matches Spotify’s Discover Weekly and Daily Mixes (even though Pandora practically invented the idea).

Pandora Premium also costs $9.99 a month, on par with the competition.  In addition, a new survey shows that despite being the “king” of streaming, its position is quickly eroding.  In the past 3 years, people aged 12 to 54 have switched to rivals like Spotify and iHeartRadio.

So, what makes Westergren and crew confident in their ability to make a profit?  The company has a “unique advantage” in understanding what users like.  That turns the service into “a friend you have known for a while”.  Over 112 million have created at least four stations, claims Westergren.  He explained that for the company,

“There’s no cold start problem.”

When you enter a song, you don’t have to have “to hunt and peck your way to a playlist,” said Westergren.  Instead, with Pandora, you will find a whole host of songs uniquely picked for the users (again, like Spotify.)

Westergren dismissed speculation about a SiriusXM acquisition as merely the “joys of being a public company”.  The company will instead focus on the product, artist partnerships, advertisers, and shareholders.

But, will the company take on private equity financing?  Probably, but Westergren said that the company would do so “from a position of strength”.  Top smartphone launches, including the new Samsung phone, the iPhone, and Amazon Echo’s success will ultimately benefit the company’s business.

“We love new products that come out for distribution.  We are the most used app on pretty much every one of these devices.”

However, in the interview, Westergren didn’t lay out a clear financial game plan for the company.  Pandora has remained in the internet radio market for 17 years now.  It has yet to unlock the secret to turn large subscriber numbers into profit, however.


2 Responses

  1. music stowaway

    The way to make a profit and a potentially huge profit is to establish the brand internationally, snatch as much market share in the streaming space at whatever the cost – and then launch a successful billion dollar IPO and walk away super rich able to afford your own private airplane, yacht, New York mansion in the sky and a Los Angeles gated mansion.. and cars cars and more cars..

    The IPO is the money ticket !!

    Of course I’m saying this tongue in cheek.. but there’s an element of truth behind this sort of machination..

    As Neil Bogart of Casablanca Records and Filmworks had his company P&L described as profitless prosperity.. Ship Gold and Return Platinum.. (see the book “Hitmen”)

    Having leading market share that’s every multi billionaire tycoon’s dream..

    Reply
  2. Guyern

    How to make a profit:

    1-Ask underground artists to be ok with smaller pay, HONEST pay.
    1.1-DON’T DO THE SAME with big labels, they don’t care, they have extreme airtime at tv and radios they dont need you or internet, actually they would be happier at a alternate reality where the year is 2017 and internet was not invented yet. If you the owner don’t know that is don’t know basic music 101.

    2-Create a “variable” at the server called big labels. This variable start with integer value X and after 10 seconds the value is set back to X. Everytime the genome system decide a big label song should be played for some user, it go to that variable and reduce the value by 1. If the variable big labels value is 0, the system will not pick this song and instead will pick another song (an small label one).
    2.1-The value X is the max amount of big labels songs you are willing to pay per 10 seconds.

    The idea behind this plan is that you reduce the amount you will pay to artists to a reasonable value, and so decrease costs.
    Big labels won’t accept that, so you reduce the amount of times a big label song will be played, to save costs and profit.
    Removing big labels songs aren’t an option, because most of mainstream songs are big labels ones, and if someone (99.8%+ of population fall at this) that don’t know yet the world of underground(99.98%+ of all songs) music (your genome system will help them discovering the wonderfull world of music) , they will add mainstream songs as a seed.

    Reply

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