Pandora tells investors it expects royalties as a share of revenue to fall over next few years

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Issue Date: 
Mar 20 2013 - 12:15pm

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Leading webcaster Pandora says it expects the share of its revenue it pays to license copyright music will fall. CFO Mike Herring said the company is counting on royalties to fall from 60% of its revenue to 40% "over the next few years." Pandora's plan is to both increase ad revenues, and decrease royalties.

Herring spoke at a Roth Capital Partners investor conference yesterday. He told investors improved ad-targeting and interactive features will increase the value of the ads Pandora runs, allowing a higher premium. Pandora is also counting on a stronger showing when royalty rates are determined for the next 5-year term (the process begins in January), and perhaps legislative relief in the form of the Internet Radio Fairness Act (more in RAIN here).

Though Pandora claims 8.5% of overall U.S. radio listening, its revenue is only 1% of the radio industry's. Music royalties came to 61% of Pandora's $125.1 million in revenue during the quarter ending January 31 (see RAIN here). That was up from 59% the previous year.

Read Bloomberg.com's coverage of Herring's speech at Roth Capital Partners here.

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