RAIN 3/7: Pandora posts huge Q4 listening and revenue gains, yet an $8 million loss

Michael Schmitt
March 7, 2012 - 12:15pm

PandoraPandora's usage and audience size grew ever larger in the financial fourth quarter (which ended January 31), according to stats released yesterday by the webcaster. Revenues showed strong growth as well, but it wasn't enough to offset growing royalties and other costs. The company posted a loss of over $8 million for the quarter, missed analyst expectations and traders have so far reacted negatively.

Pandora reported Total Listener Hours for Q4 stood at 2.7 billion, up 99% from last year. “On a typical weekday, we now stream half a billion songs,” said CEO Joe Kennedy. He also stated that Pandora now represents 5.55% of total radio listening -- more than double what it was last year.

The number of users actively listening to Pandora increased to 49 million in February, up 57.5% from last year. Around 70% of Pandora's listening now takes place on a mobile device.

Kennedy said Pandora will release updated “key audience metrics” each month, starting for February. Pandora's February stats include reaching 49 million active users, 975 million total listener hours and a 5.74% share of total U.S. radio listening (more here).

Kennedy pullquote"Pandora continues to rapidly disrupt the radio industry and has only just begun to realize the potential of our $37 billion U.S. market opportunity," said Kennedy.

On the financial side, Pandora generated $81.3 million in revenues during Q4 -- a growth of 71% from last year. Ad revenue growth outpaced subscriptions, growing 74% to $72.1 million (compared to 51% and $9.2 million for subs).

However, costs outpaced revenue during the quarter. Content acquisition costs (which includes royalty payments) reportedly reached $48.2 million in Q4, up from $23.9 million last year (an increase of around 100%). Those costs represented around 59% of total revenue in Q4, up from 50% last year.

Overall, Pandora posted a loss of $8.2 million in Q4.

The stock market's reaction to Pandora's Q4 results so far has been negative. Pandora's current stock price as of publication ($10.95) is down around 20% from Tuesday's closing price of $14.27 per share, which was in turn down 3%.

Monetizing mobile listening continues to be a challenge: Pandora said its revenue per 1,000 listener hours on desktops is $60 to $70, while only $20 for mobile devices. That said, the company reported generated $100 million in mobile ad revenue throughout the fiscal year. That means Pandora saw "more mobile ad revenue last year than any entity other than Google."

Joe Kennedy, CEO of Pandora

For the fiscal year 2012, total revenue was $274.3 million, a 99% year-over-year increase. Said Kennedy (pictured right): "We have barely scratched the surface of our market opportunities” for monetization. “We will [soon] be larger than the largest AM or FM station in most markets... our relevance to buyers of traditional radio advertising is skyrocketing." 

Kennedy also said Pandora is staffing local radio ad sales teams in most top 10 U.S. markets. Plus, the company is reportedly working with Triton Digital to create metrics that appear "in the same format advertisers are accustomed to seeing."

You can find Pandora's press release about Q4 results here. You can also find more coverage in the Wall Street Journal here, TechCrunch here, Radio-Info here, Audio4Cast here and Billboard here.

Paul Maloney
March 7, 2012 - 12:15pm

The newly-relaunched Audiogalaxy.com is designed as a "hybrid" of two popular online music models: (1) an online "locker" to store and remotely stream users' private music collections, and (2) customizable, algorithm-based "music discovery" streams -- in other words, personalizable Internet radio.

But more than this particular combination, what's interesting is the delivery structure. The music isn't even streamed by Audiogalaxy in the conventional sense -- what the user hears is actually streaming directly from user to user, without ever being saved on the company’s servers: peer-to-peer streaming. Logically, this arrangement greatly reduces Audiogalaxy's bandwidth bill while quickly growing their library of available music. 

"Our service offers music fans a tunable music experience - play your own tracks anywhere without uploading, copying, or syncing, or lean back and start discovering music you don't own via Mixes," Michael Merhej, the company's founder, said in the launch announcement. The company calls the music discovery streams "Mixes;" they're playlists of recommended songs pulling not from a library Audiogalaxy had to build itself, but from all of Audiogalaxy's users' collections.

Because of the peer-to-peer architecture, the locker service doesn't require users to actually upload their music files. Instead, up to 200-thousand songs on your computer are simply scanned and made available for instant streaming.

(While this is reminiscent of iTunes Match or the MP3Tunes.com "Beam-It" feature (here), its fundamental difference is that Audiogalaxy isn't serving the file back to the user.) 

The streams are ad-free and cost nothing for desktop listening. Mobile streams are $4/month.

Janko Roettgers, in GigaOM, wrote, "I had a chance to play with both the Web as well as the mobile version of the service Monday, and I liked what I saw. Pandora tends to gear towards the mainstream when listening to niche channel stations, but Audiogalaxy served up tons of music I hadn’t heard before. The local stations are also a nice touch. However, the Android app seemed a bit too cluttered to be useful, with too many options to access information about playlists and stations."

See more, including an introductory video, here. Read Roettgers reporting here.

Michael Schmitt
March 7, 2012 - 12:15pm

MobileMobile music app sessions have increased 530% from last year. That's according to mobile analytics company Flurry, which presented data at Music Ally and The Appside's Music Apps: Beyond the Hype event yesterday.

“Music is growing very, very fast. It’s an exciting place to be," said Flurry's Richard Firminger. Overall, U.S. smartphone owners reportedly spend 72 minutes a day on the web and 94 minutes using apps.

Moreover, users appear to be more willing to pay for music apps compared to other app categories. Music Ally has more coverage here.

Michael Schmitt
March 7, 2012 - 12:15pm

Jessica SteelJessica Steel, Pandora's EVP of Business and Corporate Development -- and "one of the top female executives in Silicon Valley," according to CNet -- is stepping down.

Steel has spent nearly 8 years with Pandora. She is reportedly retiring to spend more time with her son.

"Steel's role at the Internet radio giant was to lead the company's business development and work on strategic partnerships with device manufacturers, car companies, and more," writes CNet, which has more coverage here.