Pandora: The No. 1 radio station in Los Angeles?

Pandora, the Internet streaming radio service, is the No. 1 radio station in Los Angeles by audience size, according to a poll released Tuesday by the Media Audit.

Pandora beat out local stations such as KIIS-FM, KNX-AM4, KROQ-FM5 and KOST-FM in the survey of 54,000 adults who were asked in the biennial phone poll, in October, what stations they had listened to in the previous week.

The research group estimated that 1.9-million people in Los Angeles listened to Pandora between September and October of 2011. The No. 2 station, KIIS-FM, garnered 1.4-million listeners in the same time frame, according to the survey.

The results dovetailed with Pandora's current efforts to launch advertising sales teams in local markets, including one this week in Los Angeles.

The Oakland-based company has come under heavy criticism from investors in recent months for not growing its advertising revenue quickly enough to make up for rising costs. In the last fiscal year Pandora paid $148.7 million — about 54% of its total revenue — in music royalties, contributing to a $16-million loss.

Ad revenue is widely seen by Wall Street as a way for the company to get ahead of its costs and turn a profit. But marketers have not paid as handsomely for Internet ads as they have for traditional media, including radio. Pandora is hoping surveys like the one from Media Audit will help persuade Madison Avenue that a listener of Internet radio is just as valuable as one who is tuning in to broadcast radio.

For now, Wall Street isn't turning up the dial on Pandora's stock. Its shares closed down 3 cents at $8.53, from an initial public offering price in June of $16 and a high of $20 in July. 

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Photo: Pandora co-founder Tim Westergren. Credit: Ryan Anson / Bloomberg. 

— Alex Pham

 

 

 

 

 

 

 

Pandora listeners grow 59%

Pandora Media Inc.'s stock may have been on the decline, but the number of listeners for its online radio service has kept growing.

The Oakland company said Thursday that the number of active listeners (that is, people who have used the service at least once in the past 30 days) grew to 51 million in March, up 59% from a year earlier.

The amount of time users spend listening also grew -- to more than 1 billion hours last month, from 567 million hours in March 2011. Each Pandora listener spent more time on average with the service as well, about 19.6 hours in March compared with 17.7 hours a year ago.

But the increase in listening hours is a double-edged sword. Pandora must pay royalties on every song its service plays, so as the hours rack up, so do Pandora's licensing costs.

Still, the company could use a splash of good news. Its stock suffered a punishing 19% drop last month after it posted higher-than-expected losses and projected lower revenue for its first quarter this year. It closed down 13 cents to $9.92 Thursday, far below its $16 initial public offering price in June.

Wall Street analysts were heartened by the company's audience gains.

"We’re encouraged by Pandora’s share gains, and we continue to believe the company will improve mobile monetization as the regional sales force expands and audience measurement comparable with radio materializes," J.P. Morgan analysts Doug Anmuth and Shelby Taffer wrote in a note to investors.

But Anmuth and Taffer cautioned against popping the champagne cork just yet. Citing an article in the Wall Street Journal, they noted that major companies could follow Proctor & Gamble's recent move to crack down on employee usage of "bandwidth intensive" services at work, including Netflix and Pandora.

"About 18% of radio listening takes place in the workplace, and we believe many companies already prohibit access to streaming media sites," Anmuth and Taffer wrote. "We would not want to see this become a trend."

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Photo: Pandora co-founder Tim Westergren. Credit: Ryan Anson / Bloomberg 

Pandora stock drops 19% on rising loss, falling revenue estimate

Investors slammed Pandora Media Inc. and shares dropped 19% Tuesday after the Oakland online radio company reported a higher-than-expected loss and projected that its current quarter revenue would decline.

Pandora's shares plunged Tuesday, retreating as much as $2.73 to $11.54 in after-hours trading following the company's announcement of its financial performance. It had closed earlier at $14.27, down 39 cents.

Although its fourth-quarter revenue grew 71% to $81.3 million from $47.6 million a year earlier, Pandora's losses widened to $8.2 million, from a $1.4 million loss in the year-earlier period. Pandora also projected that its sales in the current first quarter would be between $72 million and $75 million, dropping by as much as 11% from the previous quarter.

Pandora receives close to 90% of its revenue from advertising, with the remainder coming from subscribers who pay $36 a year for the ad-free premium service.

"Everyone is asking: Why is revenue so low? Why are they losing so much money?" said Michael Pachter, a media analyst with Wedbush Securities. "The answer is that they weren’t focused on selling ads."

Instead, Pandora concentrated its energies persuading car manufacturers to build its Internet music streaming service technologies directly into the dashboards of new cars, Pachter said.

Believing that the way to grow is to capture listeners while they are in their cars, Pandora has worked closely with companies such as Ford, Toyota, Mercedes-Benz and others to design its service into new vehicles. But car manufacturing cycles take years, and Pandora's efforts today may not bear fruit quickly enough for impatient investors on Wall Street.

The stock debuted on June 15 at $16 a share, but sank to $13.26 the following day.

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Photo: Pandora co-founder Tim Westergren. Credit: Ryan Anson / Bloomberg  

-- Alex Pham

 

 

 

Pandora ekes out unexpected profit for third quarter

Online radio service Pandora Media Inc. posted a modest profit in its third quarter, beating most Wall Street analysts' expectations for the Oakland-based company.

Pandora recorded net income of $638,000 on $75 million in revenue for the quarter ended Oct. 31, compared with a net loss of $1.8 million on sales of $37.7 million the year before. On a per-share basis, however, the company reported a break-even quarter versus a 15-cent loss a year ago. Pandora gets the lion's share of its revenue, roughly 88%, from advertising. The remainder comes from subscriptions to its premium, ad-free service.

Analysts polled by Thomson One on average projected that Pandora would lose $1.2 million in the quarter on $71.4 million in sales.

Pandora warned investors Tuesday not to anticipate further profits for the remainder of the year. It forecast a loss of 2 cents to 4 cents a share for the current fourth quarter, leading to a full-year loss of between 2 cents to 5 cents a share.

The company's shares, which lost 67 cents to close at $11.85 Tuesday, shed an additional 43 cents in after-hours trading following its earnings release. The decline in Pandora's share price was largely due to investor concerns over the firm's high costs of licensing the songs it plays to 40 million listeners who streamed 2.1 billion hours of music during the quarter. Pandora pays a royalty fee every time a song is played.

On the other hand, the company is making strides capturing listener market share among competitors including Slacker -- both online and vis-a-vis traditional broadcast radio. Pandora's share of online radio streaming climbed to 66%, up from 53% a year ago. When compared with over-the-air radio stations, such as those operated by Clear Channel Communications Inc., Pandora's share doubled to 4.3% from 2.1% a year earlier.

"That said, it's still just 4.3%," Pandora Chief Executive Joe Kennedy said in an interview. "We have a tremendous opportunity to expand our share, and we're continuing to invest in efforts to grow further."

Pandora has been working with automotive manufacturers to build its streaming radio service directly into new vehicles. Last week, Honda became the sixth major auto company to agree to integrate the service into its cars. Pandora also has deals with Ford, Toyota, BMW, Hyundai and General Motors, which will gradually roll out cars with the service in coming years. Pandora is already integrated into the Ford Scion and the Toyota Camry. 

Getting into cars is a critical step for Pandora to compete with broadcast radio for the $17-billion radio advertising business. 

"The rubber is beginning to hit the road," Kennedy said.

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Photo: Pandora Chief Executive Joe Kennedy. Credit: Pandora.

Pandora posts loss as revenue increases 117%

Online radio company Pandora Media Inc., whose stock price has been on a wild ride since its initial public offering in June, posted fiscal second-quarter earnings that beat Wall Street's relatively low expectations and drove its beleaguered shares up 3%.

The Oakland firm reported a 117% increase in revenue from a year earlier to $67 million as advertising and subscription sales grew.

The company, however, continued to lose money, posting a $1.8-million loss, or a loss of 4 cents a share, for the quarter that ended July 31 compared with a $1.6-million profit, or 4 cents, a year earlier.

Adjusting for stock compensation costs for its executives and other special expenses, Pandora posted $3.3 million in net income, compared with $2.6 million a year earlier. Analysts had expected Pandora to break even for the quarter on $61 million in revenue.

Its shares, which rose 40 cents to $12.47, jumped an additional 33 cents in after-hours trading following the earnings release.

Still, the price is a far cry from the stock's $16 debut June 15. It shot up to $20.04 on July 1, but subsequently slid to a low of $11.73 on Aug. 9 as investors fretted over Pandora's high expenses. In particular, the company spends roughly half its revenue on music royalties to publishers and other rights holders. It paid $33.7 million in royalties in its second quarter.

Pandora, which makes the bulk of its money selling ads, is betting that its revenue will grow faster than its costs as its share of radio listening increases.

The company's 37 million active users spent a total of 1.8 billion hours in its second quarter listening to the free service, accounting for just 3.6% of all U.S. radio listening.

The 11-year-old company hopes that share will grow once its service is a built-in option for new automobiles, where half of all radio listening occurs. But the process of integrating Pandora's features into cars will take some time because manufacturers can take as long as two years to design new vehicles, Pandora Chief Executive Joe Kennedy said in a conference call with analysts.

“It will take some years … before this growth engine is fully developed,” he said.

Meanwhile, Pandora projected that it will continue to be unprofitable for its current fiscal year, despite double- to triple-digit growth in sales.

Revenue for the fiscal year that ends Jan. 31 is expected to be between $270 million and $275 million, with a loss of 5 cents to 7 cents a share.

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Zynga files long-awaited IPO plan, hopes to raise $1 billion

Zynga Inc. finally lobbed its long-awaited bid to begin selling its shares on the New York Stock Exchange, joining an illustrious list of technology companies that have enjoyed successful initial public offerings this year, at least during the first days of their IPOs.

The 4-year-old San Francisco company -- whose social games CityVille, FarmVille, Empires & Allies and Zynga Poker make up the top four most popular applications on Facebook -- boasts more than 271 million players who have fired up one of its 57 games at least once in the last month, according to AppData.com.

Zynga's filing with the Securities and Exchange Commission on Friday follows stock offerings from a cluster of Internet companies, including Pandora Media Inc., LinkedIn Corp., Yandex and Demand Media Inc., whose lofty debut prices were reminiscent of the 1990s technology bubble that burst over a decade ago.

Pandora, the latest to go public, was initially priced at $16 on June 14, but plummeted to $12.94 by June 17 on concerns over the Internet radio company's prospects for becoming profitable. Its shares have since recovered and were trading at $20.66 at midday.

Zynga, in its filings, did not disclose a share price, the number of shares it will offer for sale or when it expects to begin offering its stock. The company hopes to raise $1 billion.

"Bankers are very aware of the Pandora fiasco and would not like to see a repeat of that," said Nitsan Hargil, senior analyst with GreenCrest Capital Management in New York. "They are likely to price Zynga much more conservatively."

Zynga differs from Pandora in another key respect. The company reported profit of $90.6 million on $597.5 million in annual revenue for its 2010 fiscal year ended Dec. 31

"Zynga is a company with real revenue and real profit," Hargil said.

Founded in 2007 by Silicon Valley serial entrepreneur Mark Pincus, Zynga has built an empire out of selling virtual goods for its games.

Named after Pincus' late French bulldog, Zinga, the company amassed funding from high-profile investors such as Kleiner Perkins Caufield & Byers, Avalon Ventures, Foundry Group, Softbank and Andreessen Horowitz. Private investors include MTV founder Bob Pittman, LinkedIn Chairman Reid Hoffman and Clarium Capital Chairman Peter Thiel.

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Photo: Mark Pincus at his home in San Francisco in 2007, the year he founded Zynga. Credit: Jakub Mosur / Los Angeles Times.

Pandora prices IPO at $16 a share, double its initial projection

Will the stock market be giving Pandora Media Inc. a thumbs up?

The Oakland-based Internet radio pioneer, which asks users to give a thumbs up or down on its song recommendations, on Tuesday priced its initial public stock offering at $16 a share. That's double the $7 to $9 range the company had initially projected in April in a filing with the Securities and Exchange Commission.

It's also higher than the range Pandora gave just days ago when it raised its target to between $10 and $12. The stock will begin trading on the New York Stock Exchange on Wednesday.

Tom Petruno, The Times' markets columnist, said in a post on Money & Co. that Pandora is simply tuning in to a chorus of investors clamoring to get a piece of hot Internet IPOs.

With companies such as Demand Media Inc., LinkedIn Corp., Yandex and now Pandora paving the way, many investors are frothing over what could be the main events over the next year when Zynga Inc., Groupon Inc., Facebook Inc. and Twitter Inc. are expected to go public.

But the lofty stock valuations are causing some analysts to see the scenario as a subdued remix of the dot-com bubble in the late 1990s, when companies with little revenue and even smaller chances of making a profit went public.

This time around, however, many of the companies have years of operations under their belts and show strong revenue growth. Some, including Zynga, are even said to be profitable.

Pandora, however, whose IPO pricing gives the company a $2.4-billion valuation, is still in the red. As is Groupon, which lost $389.6 million in 2010.

That hasn't deterred investors from piling in and driving up IPO prices. For Pandora, the question now is how high investors will push the stock in its trading debut.

"It's a great company that's probably worth $1.2 billion," not $2.4 billion, said Anupam Palit, an analyst with GreenCrest Capital Management in New York. "There's so much investor demand now for hot tech IPOs that the price has gotten a little rich for my taste."

-- Alex Pham

Pandora, investors seek up to $123 million in IPO

Pandora Media Inc., which announced plans earlier this year to sell its stock in an initial public offering, said the company and its investors were seeking to raise as much as $123 million--an amount that would value the Internet radio pioneer at about $1.3 billion.

The proposal, filed Thursday with the Securities and Exchange Commission, calls for the Oakland company to sell a little more than 5 million shares, priced between $7 and $9 a share. Pandora's stakeholders, meanwhile, expect to offer 8.7 million shares, for a total of 13.7 million shares, or about 8.8% of the company.

Pandora, which requested to be listed under the ticker symbol "P," did not specify when it would begin selling its shares on the New York Stock Exchange. 

Among Pandora's investors are Walden Venture Capital, Crosslink Capital, Greylock Partners, Labrador Ventures, Hearts Corp. and former News Corp. Chief Operating Officer Peter Chernin. 

Although Pandora's music service is used by more than 90 million registered users who have logged  billions of hours in listening to its catalog of more than 800,000 songs, the company has yet to see a profit.

Pandora lost $1.8 million on $137.8 million in revenue for its last fiscal year ended Jan. 31. It paid out half of that -- about $69.4 million -- in fees and royalties to music labels and publishers. The other half, and then some, went to marketing, administrative and other expenses.

The vast majority of Pandora's revenue, about $119.3 million, comes from 30-second ads that are inserted every 20 minutes on its basic service. A small number of Pandora's listeners pay a monthly fee to skip the ads in its premium service, providing the company with about $18.4 million in revenue.

Pandora's impending offering is one of several hot technology stocks to debut this year. Santa Monica online content firm Demand Media Inc., LinkedIn Corp., a social network for professionals, and Russian search engine Yandex were among the most successful IPOs this year.

Other companies reportedly lining up for later this year are Zynga Inc., a maker of social games, and Groupon Inc., which filed its IPO papers with the SEC on Thursday.

-- Alex Pham

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Clear Channel acquires mobile music streaming company Thumbplay

Clear Channel, the dominant player in traditional radio, is going over the air and into the cloud. The radio company on Monday night announced it has purchased Thumbplay, a mobile digital music company, for an undisclosed sum.

Thumbplay uses cloud-based technology to let users stream music from a catalog of 8 million songs to devices such as BlackBerry, Android or iPhone for $9.99 a month. It also lets users buy song downloads a la carte, with prices ranging from 69 cents to $1.29.

The digital music streaming company, founded six years ago as a purveyor of ringtones by Evan Schwartz, sells its services through thousands of online outlets, including AOL and Clear Channel.

Robert Pittman, chairman of Clear Channel's media and entertainment platforms, said the subscription service rounds out the company's free online radio offerings, which include 750 streaming radio channels from its local stations.

Clear Channel, though a powerhouse in terrestrial over-the-air radio, is just one of many players when it comes to the Web. The dominant player among free Internet radio services is Pandora, an Oakland, Calif.-based company that recently announced plans to sell its shares in an initial public offering.

Among subscription music services, in which members pay a monthly fee to be able to access a large catalog of songs on demand, Thumbplay competes with Rhapsody, Napster, Rdio, eMusic and MOG.

-- Alex Pham

 

 

 

 

 

 

 

Pandora files for IPO

Pandora Media Inc., an Internet streaming radio service used by more than 80 million listeners, announced plans Friday to sell shares in an initial public offering this year.

After years of struggling for survival, the Oakland, Calif., company is finally on the verge of breaking even and sees the offering as a way to raise $100 million to grow its business.

Pandora, which has a catalog of 800,000 songs from more than 80,000 artists, has roughly half the market for Internet radio in 2010, according to a study published in November by Ando Media. Though the service is wildly popular, it has yet to make a profit.

In its prospectus filed with the Securities and Exchange Commission, Pandora reported a $16.8-million loss on $55.2 million in revenue for its fiscal year ended Jan. 31, 2010. From Feb. 1, 2010 through Oct. 31, Pandora narrowed its losses to $328,000 on $90.1 million in revenue.

Because Pandora is largely a free service, only 9% of its revenue in the fiscal year ended Jan. 31, 2010 came from subscriptions and other paid services. The vast majority of the company's revenue came from advertising.

When the Oakland, Calif., company was founded in 2000 by Tim Westergren, Pandora was more of a curious academic experiment. Then called the Music Genome Project, it used musicians to analyze the attributes of all types of music, from early Renaissance madrigals to funk.

Five years later, the company introduced an Internet radio service called Pandora that used data collected from the Music Genome Project to play songs that sounded similar to individual listeners' favorite tunes or bands.

Though wildly popular, the company limped along financially until 2008, when Westergren announced that Pandora was on the brink of collapse because federal courts had ordered Internet radio stations to pay a dramatic, retroactive increase in performance royalties.

After a public campaign launched by Pandora fans who wrote letters of support to lawmakers, the fees were ratcheted down in 2009, sparing Pandora from what seemed like certain extinction.

Pandora still forks over 60% of its revenue to pay royalties, but the reprieve enabled the company to focus on growing rather than just staying alive.

The service first became available on computer via Web browsers, but its membership took off when Pandora introduced a version for the Apple iPhone in 2008. About half of Pandora’s subscribers use the service on mobile devices.

Major investors in the company include Crosslink Capital, which holds 23% of the shares, and Walden Venture Capital, which owns 18%. Westergren owns just 2.4%. Former News Corp. president Peter Chernin, who joined Pandora’s board in January, owns less than 1%.

The company did not disclose how many shares it would make available and at what price.

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