Pandora up 6% on strong earnings but Rdio and Ticketfly buys don’t pay much yet

Pandora continues to flail as Internet radio becomes just a feature baked into competitors like Spotify and Apple Music, but at least it had strong Q1 2016 earnings today. Pandora pulled in $297.3 million revenue and had $-0.20 Non-GAAP EPS, compared to estimates of $-0.32 Non-GAAP EPS. [Correction: $-0.51 EPS is GAAP, meaning results were a beat, not mixed.]

That revenue came from ads, subscriptions, and tickets sold to its 79.4 million listeners who racked up 5.52 billion listening hours, down from 81.1 million listeners but up from 5.37 billion listening hours last quarter.

Pandora’s share price rose 10% in after-hours trading after the earnings release dropped to reach $10.44 per share, but then quickly dropped to just 5% up.

“This was a really strong start to the year, and I see clear signs of momentum across our business,” said Tim Westergren, Pandora’s founder and CEO. Investors may be responding to the strong revenue, suggesting Pandora might be able to earn good money even if it loses users to competing music services.


Pandora’s revenue saw a 29% year-over-year increase despite heavy competition, which bodes well for its staying power, though that would be 19% without the $22.3 million in revenue brought in from Ticketfly. Pandora will need to earn more from Ticketfly to justify the acquisition price, though that may be tough as it has to wrestle away concert venues from long-term contracts with Ticketmaster. It did score two big wins, snatching beloved NYC venues The Bowery Ballroom and Mercury Lounge.

It didn’t help that Pandora lost $57.4 million in Q1 compared to $20.9 million this quarter last year. Running the Ticketfly and Rdio teams and integrating their products is proving costly. At least it predicts a smaller $20 million to $30 million loss next quarter on strong revenue guidance of $345 million to $355 million.

Pandora is trying to evolve into more than just radio through its expensive $450 million acquisition of Ticketmaster competitor Ticketfly and $75 million acquisition of Spotify competitor Rdio. The idea is that by selling Ticketfly concert tickets in Pandora’s audio ads, it could earn more money than selling those ads elsewhere.

And with Rdio, it could try to launch a mid-tier on-demand music streaming service that offers the ability to play some songs when you want, but not be as expensive as the $10 per month standard subscriptions Spotify and Apple Music offer.

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On the earnings call, executives laid out a plan to create a “two-sided marketplace” for music, with listeners on one side, and artists pushing royalty-earning music and concert tickets on the other.

Chief Operating Officer Sara Clemens said that Pandora’s on-demand service won’t be a “me-too” app like others on the market, and will rely on personalization rather than searching through a 30 million song catalog. The product’s release is planned for later this year.

CEO Tim Westergren dropped a hint about “short-term” subscriptions for its upcoming on-demand product. And CFO Mike Herring noted that “We don’t think there’s one price that will work for everyone. We think here’s spectrum of prices and offering that we’re going to bring to market.” That meshes with my suggestion that Pandora should offer a la carte on-demand streaming service with limited access for a cheaper price.

Meanwhile, Clemens said that promotion on Pandora is helping Ticketfly win more venues, since 40% of tickets go unsold due to lack of awareness.

Pandora can’t stay put. The Internet radio business is becoming standard in streaming apps. But if it can use its loyal listener base to sell concert tickets and on-demand access, it could remain a major force in music to our ears. The problem is that it should have seen this all coming. We sounded the alarm back in 2011 when Spotify announced a radio feature. But Pandora is still struggling to get in tune.