RAIN 8/30: Pandora nearly doubles mobile revenue, but royalty costs still account for majority of earnings

Michael Schmitt
August 30, 2012 - 12:05pm

Pandora earningsPandora's revenue and active user count both grew around 50% year-over-year in Q2 of fiscal 2013, while its mobile revenue nearly doubled. But that still wasn't enough to offset growing royalty costs, which amounted to nearly 60% of the company's revenue this quarter. To combat those high costs, Pandora has stepped up lobbying efforts for more manageable rates and is striving to -- as CEO Joe Kennedy said -- "disrupt the $16 billion radio advertising market."

The webcaster's revenue for Q2 of FY13 (the three months that ended July 31) reached $101.3 million -- up 51% year-over-year. Its mobile revenue in particular grew 86% year-over-year, reaching $59.2 million. "This quarter demonstrated that our mobile monetization strategies are working," said Kennedy.

Mobile represents around 58% of Pandora's total revenue, which accounting for 75% of usage. But Kennedy says they're "narrowing that gap... That ultimately is the key to getting the content acquisition costs down," he told Billboard (here).

Pandora accumulated 3.3 billion listener hours during the quarter, a growth of 80% year-over-year. The webcaster now has 54.9 million active users (up 48%). That growth in listening means higher royalty payments.

Pandora mobileDuring Q2 FY13, Pandora paid $60.5 million -- or just under 60% of its revenue -- in royalties to the music industry. That's up 79% year-ovear-year. Royalties have accounted for 63.9% of Pandora's revenue during the first half of the fiscal year, reports the New York Times.

All told, Pandora posted a net loss of $5.4 million for the quarter. That's the "sixth quarterly loss in two years," writes NYT, which also points out Pandora lost $3.2 million during this period last year. The problem, as always, are those royalty costs. Pandora is attacking the issue on two fronts.

First, the company "has already begun lobbying in Washington over its rates" in anticipation of new royalty rate proceedings, set to begin in 2014.

Second, "Pandora has been building up local advertising sales teams around the country, and also pushing to be included in ad networks that would put its service into direct competition with terrestrial radio stations," reports NYT (here).

"Salespeople are being deployed all over the country to compete with radio for advertising dollars," writes Radio Ink (here). "In 2011 Pandora had 427 people on the payroll. That number has increased to 589 employees with the bulk of the new hires (79%) in sales."

You can find Pandora's press release here.

Paul Maloney
August 30, 2012 - 12:05pm

By and large, the traditional broadcast experience was locally-focused, from the advertising base to your listeners and on-air product. Of course, broadcasting exists on a national level as well, if you operate in the network world. But now with the Internet, your audience and client base can truly be worldwide. And because so much is happening outside of North America we want to know about and report, we've organized our first-ever RAIN Summit Europe, in Berlin on Friday, October 5th.

(That tiny figure in the photo is Edison Research VP/Music & Programming Sean Ross, who recently visited the stylish nhow "Berlin" - The Music & Lifestyle Hotel Berlin, where we'll meet.)

More than two dozen of the top firms in the space, from all over Europe (and a couple from the U.S.), will be represented. Here's a sample:

The Association of European Radios (AER) is a Europe-wide trade body which represents the interests of over 4,500 private/commercial radio stations across the EU27 and in Switzerland. Stefan Möller (left, above) is from Finland, and is AER President. He'll speak on the "Targeted Advertising & Listener Registration" panel. That panel will be moderated by Patrick Roger, Paris-based VP/Sales & Marketing for AdsWizz. An audio and video adverstising solutions firm with offices in California and Europe, AdsWizz will also be represented at the Summit by Product Manager Erik Barraud (who works in Brussels) on the "Measurement Options for Streaming Audio" panel. AdsWizz recently announced a partnership with Streamguys here in the U.S. (more here).

Perhaps the biggest non-U.S. streaming music service is France's Deezer. David Deslandes, Deezer Deputy GM, Head of Ad Sales, will share his thoughts on the "Monetizing Digital Audio" panel. Joining him is Caroline Graze (left, below), NRJ International Head of Internet & New Business Intl., based in Hamburg. NRJ is the "Hit Music Only!" multimedia group with a brand extending across Europe and even North America and Japan.

Our keynote speaker represents perhaps the most significant online music concern to come out of Europe, Spotify. Spotify's European GM and VP of Ad Sales Jonathan Forster's (pictured right) company now boasts 15 million active users worldwide, 4 million of whom pay for the service every month. Besides its on-demand streaming product, Spotify Radio is a personalized radio stream listeners create based on artists, songs, or genres, which can be further influenced through "thumbs up/thumbs down" song ratings.

Please take a look at our full roster of industry experts and agenda of panels, all of the most up-to-date information, and registration links on the RAIN Summit Europe page. And please check out where we'll hold the Summit: the very stylish nhow "Berlin" - The Music & Lifestyle Hotel Berlin.

It's our goal to make our inaugural RAIN Summit Europe a valuable and rewarding experience for all our attendees and participants, and your presence there will help us achieve that. 

Michael Schmitt
August 30, 2012 - 12:05pm

Mohawk GuyIf you've paid any attention to NASA's landing of Curiosity on Mars, you know the "Mohawk Guy." Otherwise known as Bobak Ferdowsi, the flight director for the Curiosity mission has become an Internet sensataion. And now he's hosting a radio show.

Ferdowsi will host a two-hour broadcast on NASA's Third Rock Radio stream starting at 4PM Eastern today. Entitled "Getting Curious with the Mohawk Guy," the show "will feature Ferdowsi discussing his experience with the landing of Curiosity, NASA’s evolving image, and renewed interest in science and exploration."

You can find more coverage from Space Industry News here and tune in to Third Rock Radio here.

Michael Schmitt
August 30, 2012 - 12:05pm

Sony Music UnlimitedSony has announced a new 60-day free trial for its Music Unlimited service. The streaming music offering includes not only on-demand options, but "ad-free Pandora-like radio streaming," with both genre- and artist-based stations (RAIN coverage here and here).

Music Unlimited also gained a new monthly pricing tier: €4.99 (a little over $6) a month gets users unlimited streaming. Engadget has more info here.