If we learned anything from Pandora in 2016, we learned that they’re unpredictable. From replacing CEO Brian McAndrews with founder Tim Westergren to premium product changes and new licensing deals, Pandora is a moving target. This year is proving to be more of the same, just two weeks in.
The latest Pandora news came from the company on Thursday when they announced that they would likely exceed guidance for the fourth quarter, due to strong advertising performance and a growing customer base of 4.3 million subscribers. Wall Street responded with a 6 percent increase in stock. On January 13, stock closed at $12.76. By comparison, Pandora stock was $9.90 on January 14, 2016.
MarketWatch is not impressed, however. Sure, Pandora beat its own guidance, but it had previously revised its 2016 guidance in July and October.
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“During the fourth quarter, we accelerated our core advertising business, increased advertising RPM and saw strong improvements in adjusted EBITDA,” said Tim Westergren, CEO of Pandora. “Now, with all of the elements of our strategy in place, we are in the best position possible to expand our listener base, drive engagement and deliver significant value to all of our stakeholders.”
Pandora Plus is the newest iteration of it its internet radio station. This is the new and improved version of Pandora One, the company’s ad-free, $5-a-month online radio subscription service. The company also added features and functionality to its free, ad-supported version, generating more than 375,000 net subscribers at year end, according to a Pandora statement.
“The initial response from both new and existing listeners to the enhancements on the service is extremely encouraging,” Westergren continues. “This excitement and engagement bodes well for the introduction of Pandora Premium later this quarter.”
Pandora Premium is a new streaming music subscription service Pandora will be launching in early 2017. This new offering will help Pandora to better compete with services like Apple Music, Spotify and Tidal.
Westergren also announced that Pandora was striving for profitability after multi-million dollar losses. To that end, Pandora is reducing its workforce by 7 percent in the first quarter of 2017. This will result in a loss of 100 to 150 jobs and estimate costs of $5 million to $7 million in severance costs. The job cuts will not impact Ticketfly. At the same time, Pandora is looking to replace chief operating officer Sara Clemens who recently resigned and chief financial officer Mike Herring, who will remain president of Pandora but will no longer be the CFO.
“2016 was a year of significant investment for Pandora. In 2017, we will manage the business toward full year adjusted EBITDA profitability,” said Westergren. “While making workforce reductions is always a difficult decision, the commitment to cost discipline will allow us to invest more heavily in product development and monetization and build on the foundations of our strategic investments.”
Pandora has sustained huge losses, so it is good to see the company moving in a positive direction under Westergren’s leadership. With Westergren back at the helm of Pandora, the company has a chance to really turn things around. However, it is making so many big product, staffing and operational changes, we wonder if Pandora can devote itself fully to any of those initiatives, and even if that’s the case, will it be able to maintain advertising growth and grow its customer base while cutting staff? Will it be able to quell acquisition rumors or is it positioning itself for a sale?
Regardless of Pandora’s future, the streaming music business model still needs work. Will Westergren and Pandora develop the magic formula?