Stock Falls Again Today, Listener Hours Drop, But Pandora Still Comes Out Ahead
UPDATE: Pandora stock fell another 8,.5% to $17,97 on Wednesdy
Pandora listener hours in June fell from 1.35 billion to 1.25 billion. Pandora blamed the drop on seasonal listening patterns and a 40 hour listening cap instituted this spring. Despite the explanation, investors showed their displeasure pushing the stock downward 4.24% to close down $.87 at $19.65 on Tuesday. And in the long run, the drop in listener hours is actually a win for Pandora.
First, fewer listener hours means smaller royalty payments. It's particularly a big net win for Pandora with free users. Stifel Nicolaus analyst Jordan Rohan believes it will end up saving Pandora $6 million in content acquisition costs and, “would more than double our current net income [forecast] for the quarter.”
Second, ad revenue remains strong. Pandora still continues to attract more users, with monthly active users up from 70.9 million to 71.1 million in June. “Pandora’s advertising is sold against its audience [size] and hours reduction due to the cap is a huge increase to profitability,” concluded Rohan.
Bruce – thanks for the update on this. I am interested in the Pandora story because I listen to Pandora. In fact I pay for no-ad premium because I really like their music algorithm, quality, and I can’t stand advertisements. I am also a musician and have seen my dismal digital distribution reports.
However, I think Pandora’s product and mission are good. From my minute perspective, it appears that Pandora has been both buoyed and sucked down by the tidal wave of digital change by titans of previous music and advertising industries, desperate to support their significant overheads. They do so in the name of individual creatives, but perhaps their war cries are a bit disingenuous, since they have exploited creatives for decades.
But your article speaks to the ambiguity and ambivalence of the Pandora phenom.