Internet Radio Station Pandora Is For Sale

Streaming music service Pandora Media Inc. (NYSE: P) is bleeding about $10 million a month, but it’s for sale if you’re looking for a

Subscription News: Internet Radio Station Pandora Is For Sale

Source: Pandora

Streaming music service Pandora Media Inc. (NYSE: P) is bleeding about $10 million a month, but it’s for sale if you’re looking for a fixer upper, says Fortune. At the end of last year, Pandora had 81.1 million active users*, the largest number of users for a streaming music service. Unfortunately, the company is still losing money. [Note: 3.9 million Pandora users are paid subscribers at $5 a month.]

The company is worth about $1.8 billion now, compared to a previous high of $7 billion just two years ago, and its stock has dropped more than 60% since October, reports the New York Times. Sources that wish to remain anonymous told the New York Times that Pandora has met with Morgan Stanley to identify potential buyers.

The news came around the same time that Pandora publicly released its fourth quarter and year end financials for 2015 which revealed mixed results. For example, total listener hours grew 3% to 5.37 billion for the quarter, and grew 5% to 21.11 billion for the entire year.

The company also saw revenue increases in the advertising and subscription categories, but its costs to acquire that income were pricey. Total revenue for the fourth quarter increased 25% to $336.2 million, but it cost Pandora $142.9 million to acquire that business. Total revenue for the year was $1.2 billion with content acquisition costs of $610 million.

For the fourth quarter of 2015, Pandora reported a net loss of $19.4 million, compared to a net profit of $12.2 million for the same period last year. For the full year of 2015, Pandora reported a net loss of $169.7 million, compared to a net loss of $30.4 million for 2014.

Pandora CEO Brian McAndrews made this statement about the company’s 2015 financials:

Subscription News: Internet Radio Station Pandora Is For Sale

Source: Pandora

“We enter 2016 with an enhanced portfolio of assets, cost certainty and substantial competitive advantages. We’re invested in the long-term and I could not have more conviction about the ability of Pandora to lead the future of music. Given our confidence in our core advertising model, the massive long-term opportunity and the competitive advantages we have built, we believe 2016 is the time to build on this foundation and invest in our many opportunities to fuel revenue acceleration in 2017 and bolster long-term growth prospects.”

Invested in the long-term? Yes, the company invested money in acquisitions (Rdio and Ticketfly) last year, but if it is putting itself up for sale, are they really making long-term plans or are they bailing?

Insider Take:

So are you interested in buying a streaming music company? If so, Pandora might offer a deal to get out of what it seems to view as a “no win” situation. That’s unfortunate, because Pandora has some positive things going for it, including a sizable user base, increasing revenue and some competitive advantages as an Internet radio service.

What seems to be hurting Pandora are its low price point (most other services are about $10 a month), its high acquisition costs and growing competition from Spotify and Apple Music. Does the company need to be sold to turn these things around, or could a change of executive management help turn things around?

McAndrews, hired in 2013, has been publicly vocal about free on-demand music services and how they diminish the value of music. At the same time, he has been attacked by singers and composers via ASCAP to pay artists more for their work. The ASCAP says that a song that is streamed 1,000 times on Pandora earns the songwriter about $0.08 on average.

It seems Pandora’s troubles started around the same time McAndrews came on board. He has been able to effect some positive change and acquire some assets for the company, but increasing Pandora’s long-term value and sustainability don’t seem to be among them.

 

Up Next

Register Now For Email Subscription News Updates!

Search this site

You May Be Interested in: