The market cap value of controversial US online radio company Pandora has plummeted by more than half over the past year.
MBW analysis shows that Pandora’s share price was a healthy $33.47 a year ago (Jan 10, 2014), and had tumbled all the way down to $16.31 on Friday (Jan 9, 2015) – a 51% drop.
Compared to its 2014 high point of $37.42 in mid-February, the company’s value has plummeted by 56%.
This decline may well be the result of investor concern over the relentless fight by music publishers – particularly Sony ATV – to raise the royalty rate that Pandora has to pay songwriters.
In 2012, more than 120 high-profile artists and songwriters signed a petition against the company’s attempt to push the ‘Internet Fairness Act’ through Congress, which would result in it paying a smaller percentage of royalties to creatives through SoundExchange licensing.
But it didn’t do a huge amount of good: in March last year, the ASCAP rate court has ruled that Pandora needed to give just 1.85% of its annual revenue to the PRO and its members for the next five years.
Sony ATV boss Martin Bandier called the result “woefully inadequate” and a “clear defeat for songwriters” and vowed to push for reform in the rate court mechanism in the US.
Then in June 2014, the US Department Of Justice commenced a review of the ‘consent decrees’ of BMI and ASCAP after Sony/ATV, Universal Music Publishing, Kobalt and others moved to withdraw certain negotiating rights concerning digital radio from the two collection bodies. The publishers feel that by negotiating direct with the likes of Pandora, they can get their writers a better deal.
Other investor concerns may include a worry that Pandora listeners will migrate to the growing presence of ‘a la carte’ streaming services in the US like Spotify and Deezer – possibly born out by a slowing in listener growth.
In its last fiscal quarter, the three months ended September 30 last year, Pandora posted a $2 million net loss – an improvement on the $4.1 million net loss posted the year before.
Revenues stood at $239.6 million, which was up 40% year-on-year. The first nine months of 2014 saw Pandora’s revenue increase by 49.2% to $652.8 million.
Mobile revenue stood at $188 million in Q3 2014, up 52%, while local advertising revenue rose 118% to $41.8 million.
Forecasted full-year revenue was between $912 million to $917 million, up from a previous estimate of between $895 million and $915 million.
Active listeners at the end of September were up just 5.2% to 76.5 million. Active listeners were up just 100,000 over the 76.4 million listeners reported in Q2 2014.
Pandora also reported a 1% quarterly decline in listener hours, to 4.99 billion hours from 5.04 billion hours in Q2.
The company’s shares dropped 7% in after-hours trading after the Q3 results were announced.
Pandora recently signed direct licensing deals with BMG and independent rightsholder group Merlin.
Music Business Worldwide
