Pandora Revenue Up but Falls Short of Expectations

Pandora’s revival is not going as well as it is hoping. Both its Q3 revenues and advertising revenue were up, but were short of analyst expectations, and the company’s shares dropped as a result

Revenues were up 13% to $351.9 million, year on year. But this was short of analyst expectations of $366.1 million.

Ad revenue grew 7% to $273.7 million, but again did not impress Wall Street which had put its estimate at $286.9 million. It was a similar response to ticketing service revenue’s 25% rise to $22.1 million.

While users fell to 77.9 million, compared to 78.1 million in the same period last year due to competition from Spotify and Apple Music, total listener hours grew by 5% year-on-year to 5.4 billion.

The question is, while Pandora’s moves to recreate itself, is a step in the right direction, has it come too late?

It relied for too long on advertisements before it tried alternate revenue sources as Ticketfly (purchase price: $450 million) and Rdio (purchase price: $75 million). Its rivals in the digital sphere are better equipped. Ad revenue might be rising but not as quick as its content charges.

The one plus it has, going forward, is that its cheap $5 subscription tier might generate customers willing to pay for service with a fairly weak music library and limited social connections. If it doesn’t, Pandora’s advertising revenue will be in peril.

CEO and co-founder Tim Westergren, is optimistic that Pandora will enter profitability.

“Pandora’s transformation continues with the launch of compelling new products and partnerships that open up significant revenue streams,” Westergren said.

“Only Pandora is uniquely positioned to create deeply personalized and easy to use listening experiences that delight and engage listeners. A great product that’s effectively monetised is the cornerstone of success in digital music streaming.”

The company projects its fourth quarter net loss will shrink further to between $39 million to $51 million.

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