Pandora Media, the company behind the Internet radio service Pandora, has enjoyed a meteoric rise in popularity. But investors are concerned about its future.
The company reported $120 million in revenue for its fiscal third quarter, which ended in October, up 60 percent from the same period last year. Pandora also had net income of $2.1 million, or 1 cent a share, matching analysts’ predictions. The company offered 3.6 billion hours of personalized music streams to its users during the quarter, which amounted to 59 million people.
“This quarter exceeded our expectations as we monetized mobile at record levels and grew total mobile revenue 112 percent,” Joe Kennedy, the company’s chairman and chief executive, said in a statement.
But the company also lowered its expectations for the fourth quarter and the fiscal year, warning that it would face a loss of 6 to 9 cents a share, greater than it had earlier expected. In a conference call with analysts, Mr. Kennedy said he anticipated a drop in advertising in January because of concerns about the economy.
Pandora’s stock closed up 5.5 percent on Tuesday, at $9.45, but once its earnings were released the price fell nearly 18 percent in after-hours trading. The stock was down almost 41 percent from its initial offering in June 2011.
The company faces competition from Microsoft, which recently introduced a digital service, Xbox Music; Apple, which is said to be preparing an Internet radio service, although Apple has not commented on those reports; Spotify and others.
Pandora’s licensing costs also weighed on the company. In the third quarter, it paid $65.7 million, or about 55 percent of revenue, in “content acquisition costs,” which include music royalties. The company pays a fraction of a cent in royalties for every stream it serves, which in recent quarters amounted to 50 to 60 percent of its revenue.
Pandora has supported the Internet Radio Fairness Act, a bill that would change how its royalty rates are set (most likely lowering them). But the bill got a cool reception last week from members of a House Judiciary subcommittee.
The bill was expected to expire with the end of the current Congress, but a version of it could be introduced next year. Music groups favored a bill that would also include long-sought changes the royalties paid by terrestrial radio broadcasters.
“It was a huge win to have a hearing on our issue, especially during a lame-duck session,” Harvey Valentine of the Internet Radio Fairness Coalition, which includes Pandora, said late Monday in response to questions about the bill. “The discussion has started in earnest, and that is a big step forward.”
Article source: http://mediadecoder.blogs.nytimes.com/2012/12/04/after-a-quarterly-gain-pandora-warns-of-a-loss-to-come/?partner=rss&emc=rss
Speak Your Mind
You must be logged in to post a comment.