The chairman and chief executive of Pandora Media, the company behind the popular Internet radio service, announced on Thursday that he would be leaving the company after nine years, on a day when Pandora reported growth and better-than-expected earnings for its fiscal fourth quarter and full year.
Joseph J. Kennedy, the company’s chief since 2004, said he would remain in place until a successor was found. He informed the board at its meeting on Tuesday, and in the earnings call on Thursday gave no reason for his decision other than hinting at the toll of running a technology company for nearly a decade.
“As I approach the start of my 10th year,” Mr. Kennedy said, “my head is telling me it’s time to get to a recharging station sooner rather than later.”
Mr. Kennedy’s tenure illustrates how much Pandora — and streaming music in general — has changed. When he joined the company it was called Savage Beast, and had not developed the music genome technology that allows Pandora to tailor a stream of songs to its users’ tastes.
The service was introduced — and the company renamed — in 2005, and now its more than 67 million regular users listen to 1.4 billion hours of music each month.
Pandora dominates the Internet radio market, and has begun to challenge terrestrial radio stations for advertising. But its financial results, released after the close of trading on Thursday, show the challenges the company faces.
Its revenue for its fiscal year, which ended in January, was $427 million, up 56 percent from the year before. For the fourth quarter, it had $125 million in revenue, and an adjusted net loss of 4 cents a share, beating analysts’ expectations by 1 cent.
The stock closed at $11.73 for the day, up half a percent; shares gained more than 20 percent in after-hours trading.
While the amount of money Pandora earns from advertising on mobile devices, where about 75 percent of its listening takes place, has gradually increased, the rate for its desktop ads has been dropping. Last year, its revenue per thousand mobile listener hours — almost entirely from advertising — rose 9 percent to $23.83, but for all of its users, that measurement fell 8.5 percent to $30.49.
The company’s music licensing costs also remain high, at almost 61 percent of total revenue for the year, a recurring concern for investors.
The rates for the bulk of Pandora’s royalties are set by a panel of federal judges, and last year the company supported a bill, the Internet Radio Fairness Act, that could have resulted in lower rates.
That bill never made it out of committee, but a version of it is expected to be introduced again this year. The music industry, which mobilized against the bill last year, is gearing up for another fight in Washington.
“Joe Kennedy has done an incredible job of turning a concept into a company, and a company into a game-changing leader in online radio,” said Jordan Rohan, an analyst at Stifel Nicolaus in New York. “But succeeding Kennedy as C.E.O. of Pandora will not be easy.”
One bright spot for Pandora is bad news for Apple. Last year, reports emerged that Apple was planning to introduce an Internet radio service early in 2013 that would compete directly with Pandora. Whenever crumbs of news were published about the so-called iRadio service — which Apple has not announced — Pandora’s shares would tumble temporarily.
But Apple’s efforts have been held up by licensing negotiations with music companies, causing the service to be delayed at least until the summer, according to a number of people briefed on the talks, who were not authorized to discuss them because they were private. An Apple spokesman declined to comment.
Article source: http://mediadecoder.blogs.nytimes.com/2013/03/07/chief-executive-at-pandora-media-to-step-down/?partner=rss&emc=rss