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Pandora’s Improving Offerings

Posted on Tuesday, Nov 18th 2014

According to a Juniper Research report on the online music streaming industry, the online music market is projected to grow from $12.3 billion this year to $13.9 billion in 2019. The analyst believes that while the market is seeing intensifying competition from bigger brand players like Apple and Google, it is not necessarily seeing a significant growth in revenues. It means that online streaming players like Pandora (NYSE:P) will have to up the volume in terms of offerings to keep attracting a bigger customer base.

Pandora’s Financials
Pandora’s third quarter revenues grew 40% over the year to $239.6 million, ahead of the Street’s projections of $236.5 million. EPS of $0.09 was also ahead of the market’s expected $0.08.

During the quarter, advertising revenues grew 44% to $194.3 million while subscription service and other revenues increased 32% to $45.3 million. Total revenue per thousand listener hours improved 7% to $43.41. Pandora’s advertising revenue per thousand listener hours (RPMs) from mobile and other connected devices increased 6% to $40.11.

Among operating metrics, active listeners improved 5% to 76.5 million and total listener hours increased 25% to 4.99 billion. Pandora now accounts for 9.06% of the US radio listening market compared with 7.77% a year ago. Total revenue per thousand listener hours improved 12% to $48. Advertising revenues per thousand listener hours from mobile and other connected devices improved 12% over the year to $44.35. Mobile advertising revenues per thousand listener hours improved 16% to $40.82. Mobile now accounts for 78% of total ad revenues as they improved 56% over the year to $151.7 million.

For the current quarter, Pandora projected revenues of $273 million-$278 million with an EPS of $0.17-$0.19. They expect to end the year with revenues of $912 million-$917 million and an EPS of $0.19-$0.21. The Street was looking for revenues of $272.8 million and an EPS of $0.17 for the quarter and revenues of $911.58 million and EPS of $0.18 for the year.

Pandora’s Improved Offerings
Pandora has been taking several steps to improve their monetization capabilities. Recently, they began testing a new product Sponsored Listening. The new format gets users access to an hour of ad free music streaming provided they click a banner ad. The beta testing of the product has already begun on their mobile app with brands like Sony’s Playstation and Fox signing up. Fox is using the new ad format to push their new TV shows. Initially the ads will be tested on a small group of targeted users, but the format is expected to be released to the wider audience by the latter half of 2015.

They are also improving their analytic offering. They have released Pandora Artists Marketing Platform (AMP), a free online service that provides artists and managers with access to a detailed overview of their audience. The analytic tool goes through tens of billions of hours of personalized listening and can help artists gain better insight into their audience demographics. The data made available to the artists will help them improve their decision-making on activities such as tour routing and audience targeting.

They recently also tied up with Merlin to provide over 20,000 labels and distributors with improved access to their data. Through the deal, Pandora will not have to pay the statutory rates set by the Copyright Royalty Board but will pay the rates negotiated with Merlin.

Their stock is trading at $2o.16 with a market capitalization of $4.2 billion. It touched a 52-week high of $40.44 in March this year.


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