Seeking Alpha

Pandora lower after releasing May metrics

  • In its last monthly audience report (quarterly numbers will still be given), Pandora (P -2.2%) states it had 77M active listeners in May, up from 76M in April and 70.8M a year ago.
  • However, listener hours only rose 1.7% M/M (in spite of an extra day) to 1.73B. On a Y/Y basis, they rose 28%.
  • Pandora's share of total U.S. radio listening (influenced by seasonality) was 9.13%, down from 9.28% in April and up from 7.29% a year ago.
  • The numbers come amid worries about the Apple/Beats deal, an expected iTunes Radio revamp,  and Amazon's reported plans to launch a streaming music service bundled with Prime subscriptions.
Comments (27)
  • manicdvln
    , contributor
    Comments (579) | Send Message
     
    They losing MARKET SHARE WHILE CANACCORD STATED THEY REDUCED AD LOAD!!

     

    DOUBLE DOWN BAD!

     

    PANDORA WILL NEVER MAKE MONEY.
    4 Jun, 12:00 PM Reply Like
  • dgulick
    , contributor
    Comments (1348) | Send Message
     
    First off, didn't lose market share, and secondly, while audio ad load was down, video was up http://bit.ly/1hzf2Jo

     

    But what you should be worried about with your short is Pandora's shifting to higher value local advertising (increased local salespeople 43% over last year, now in 37 markets, compared to only 8 local markets just 2 yrs ago):

     

    "The study noticed a shift to small-business and local ads, which grew in volume, displacing some national brand advertising."

     

    Canaccord maintains their "buy" rating with a $43 price target (+80% upside)
    4 Jun, 01:01 PM Reply Like
  • manicdvln
    , contributor
    Comments (579) | Send Message
     
    Salespeople? How much they paying them? 50% of revenue? Sure as hell songwriters aren't getting paid lol

     

    I don't see PROFITS! Maybe Pandora not familiar with that term.
    4 Jun, 05:25 PM Reply Like
  • dgulick
    , contributor
    Comments (1348) | Send Message
     
    All time high in active users (77M, +9% YoY) and listener hours (1.73B, +28% YoY, works out to ~27B songs streamed in May, or on average, at any given moment, streaming 2.4M songs simultaneously). Pandora showing excellent growth amidst all of the new competition, and absolutely massive scale.

     

    The head scratcher is the MoM decline in US radio share from 9.28% in April to 9.13% in May (though to keep it in context this represents an increase from 7.3% last year). This could be attributed to noise in the Arbitron sampling (this portion of the calculation is done with a relatively small sample of the population simply being asked "how much FM radio did you listen?", comical when one considers the digital methodology Triton uses to measure streaming radio listener metrics, now MRC accredited: http://bit.ly/1iWCVoZ )

     

    But if we are to take it at face value, the metrics indicate that Total US Radio listening (including traditional AM/FM, SiriusXM and internet) has increased 2.3% YoY. Is this a trend? Are we seeing radio stealing market share from owned music? (iTunes sales down -15% YoY).

     

    I think we are seeing why Apple bought Beats, a hail Mary pass with hopes of stemming Apple's music losses.
    4 Jun, 12:41 PM Reply Like
  • J. Woods
    , contributor
    Comments (37) | Send Message
     
    It all seems irrelevant. The stock is priced for rapid growth, which it's no longer doing. The MoM data makes that clear. "Holding steady against fierce competition" is not a "winning" position for a stock priced for explosive growth.

     

    Given valuation and financial metrics, the MoM numbers need to be high enough to support a theory of sustained rapid growth (ala 30% YoY going in to next year - at least). I don't see any data that shows that, and all the while competition continues to enter the field.

     

    This stock is way overbought institutionally...once a few major plays decide to roll out, the confidence game will end and with it the analyst ratings will fall.

     

    Long Jan 17 2015 $30 Puts, will likely not take any off of the table until sub-$16 price is hit.
    4 Jun, 01:46 PM Reply Like
  • AngleSideSide
    , contributor
    Comments (166) | Send Message
     
    I think you're onto something in your last two paragraphs. Subscription music seems to have legs.

     

    I think we could see some explosive growth ahead once people like me get over the hurdle of paying for yet another subscription streaming service. The cord cutter crowd is growing by the day, and this is a natural extension of the a la carte streaming content movement.
    4 Jun, 01:52 PM Reply Like
  • dgulick
    , contributor
    Comments (1348) | Send Message
     
    @AngleSideSide,
    Crunching numbers a bit further, P listener hours in May represent a net increase of +380M hrs YoY, basically accounting for 88% of the +430M hr increase to total US radio listening that these metrics suggest. (can't know the breakdown of the remaining 12% based on the released metrics, though presume it is other internet radio, iHeartRadio, etc).

     

    Though lets remember that these metrics are purposefully provided by P to propagandize their stance as a radio service when in reality, with the thumb up/down feature and the genome/playlists, P certainly represents a value proposition that is above traditional radio (unlike traditional radio, P will not (and cannot) play a song you don't like, since you can skip it!), though without the ability to manually select the song, or rewind features, P sits below on-demand services (Spotify, Beats, etc). My point is, that, of course, P will eat into music sales (in addition to traditional FM radio ad revenues).
    4 Jun, 02:51 PM Reply Like
  • dgulick
    , contributor
    Comments (1348) | Send Message
     
    @J. Woods,
    As for MoM metrics "no longer showing rapid growth", I'd argue that +30M additional hours (+400M songs) over last month streamed to 77M users, +1M of which are new this month, all indicate very solid growth. (not to mention revenue, guiding +39% YoY).

     

    "once a few major plays decide to roll out, the confidence game will end and with it the analyst ratings will fall."

     

    I would argue that the first half of your comment has already happened (shares are -40% off their high, after all), and a few analysts did weathervane with this slide, but most have maintained their price targets (out of 33 analysts I get an average PT of $35, +40% upside potential).
    4 Jun, 03:16 PM Reply Like
  • AngleSideSide
    , contributor
    Comments (166) | Send Message
     
    @dgulick -- that's where you lose me. I think P (as they argue themselves) competes more directly with traditional radio, whereas Spotify and Beats compete directly with album sales.

     

    One is a "kick back and listen" service. The other two are services for people who like music enough to actually buy albums (and know enough to seek out music they like). You could use tourism as an analogous industry. Pandora would be a cruise ship or all inclusive resort, while Spotify/Beats would be self-guided vacations across Europe using Airbnb. Same industry, vastly different customers.

     

    To the extent that we see a tipping point in subscription services (and the noise surrounding AAPL's Beats acquisition may have caused that), I'd expect to see those "radio" market size numbers grow as more of the music buyers become music subscribers.
    4 Jun, 03:48 PM Reply Like
  • dgulick
    , contributor
    Comments (1348) | Send Message
     
    Well, one person hardly makes a concensus, but here's my music consumption history:

     

    1970s: 1. radio 2. records/8-tracks
    1980s: 1. cassette tape/records 2. radio
    1990s: 1. CDs 2. radio
    2000s: 1. MP3s (ipod) 2. radio
    2010s: 1. Pandora 2. MP3s (iphone)

     

    I agree with your comment, there are different markets that on-demand (Spotify, Beats) vs. free/ad-supported "radio" (Pandora, iHeartRadio, iTunes Radio) are pursuing, but part of my love of P is I don't have to do anything, so I went from being more of a "lean forward" type (shopping and paying for music, making mix tapes to building playlists, etc) to a "lean back" as I got older/busier, but more to the point, if P didn't bring me music I wanted to hear, I'd still be "lean forward". P bridges the gap, maximizing bang-for-the-buck (great music for little/no effort). It would appear that 77M people agree!
    4 Jun, 04:17 PM Reply Like
  • J. Woods
    , contributor
    Comments (37) | Send Message
     
    @dgulick

     

    "I'd argue that +30M additional hours (+400M songs) over last month streamed to 77M users, +1M of which are new this month, all indicate very solid growth. (not to mention revenue, guiding +39% YoY)."

     

    The numbers sound bullish when you optimize the use of percentages and absolutes. 1M new users in the month is 1.3%. Given the rate of change in this arena and the competition it's easy to say that 1.3% is very impressive growth. It is. The problem is, the company is priced for much higher growth based on any model I can really come up with. Similarly, 39% rev increase sounds great, but when you consider the starting point (and profits, and margins, and age of company) it's not very meaningful.

     

    The problem with a momentum play is unless it reaches escape velocity it will implode just as fast as it exploded. If the price is low near year end, funds will cut it (tax loss harvesting). Also, in any scenario where employee compensation is heavily tied to stock price you'll start to see major attrition. While they could up stakes to compensate, that will create yet another hurdle in the market for stock growth.

     

    Without some radical new offering (and aggressive international expansion), I'm afraid their only hope is selling the company. To me, that doesn't look likely at high prices, but maybe. They could always throw up a hail mary...but odds seem against it.
    4 Jun, 04:20 PM Reply Like
  • dgulick
    , contributor
    Comments (1348) | Send Message
     
    "the company is priced for much higher growth based on any model I can really come up with"

     

    Would love to see it, I get P fair value mid 60s, heck I get high 30s with no further usage growth (not something I expect, just putting a floor under my model), by just the eventual closing of the gap between P's current share of US radio listening (9.1%) and share of radio ad revenue (3.8%), something I consider a given, only a matter of time.

     

    "I'm afraid their only hope is selling the company"

     

    The hire of McAndrews certainly indicates they are game. Also, balance sheets at more than a few large caps are of the bloated nature even after large share repurchases and dividend increases. Obviously you followed Apple's uncharacteristic acquisition of Beats Music (largest ever for Apple) in an effort to shore up their sagging music position. Does this wake up any (or perhaps more than one) sleeping giant to the fact that Apple has recognized that its former near monopoly in digital music is vulnerable? Music is becoming more and more critical to mobile, just saw that Shazam is going to be integrated in iOS8 "what song is this, Siri?", will they be bought soon in order to lock out Android (and will Android respond by buying Soundhound)?

     

    The Android/iOS war has gone beyond superior valued hardware/software, they are now locking up features, which includes content delivery. Amazon has seen the writing on the wall and is coming out with a phone (the Kindle Fire has always been an interesting marriage, obviously android based, but defaulting to Bing for search). And speaking of, then there is Microsoft, woefully behind with their windows phone and surface, they have the cash, maybe they buy P to try and catch up/leap frog their competitors in music streaming, a category that is more and more often being tagged in the media as the "future of music distribution".

     

    Will be interesting.
    4 Jun, 07:45 PM Reply Like
  • manicdvln
    , contributor
    Comments (579) | Send Message
     
    It's not about buying random companies out in specific sector, it's getting an advantage over your competitors.

     

    Pandora has no advantage.

     

    It's limited to USA, it deems itself radio, so no ondemand or offline caching, todays shareholder pretty much gave us a clear preview that Pandora has no intention to fight for subscription model (even though every other successful media service like Netflix use this model), it has no patents, no real tangible assets, its royalty agreements with ASCAP and BMI have no advantage over competition, it has no exclusive content and has the lowest amount of songs vs every other competitor, a mere 800k, it growth rate has fallen tremendously and with todays metrics it shows their market share is shrinking.

     

    And you can get all this for mere 5B!!! LOL

     

    Let's get real, if no one bought Pandora at 8$ or before IPO why would anyone buy now with ridiculous valuation and their performance is just as bad as before with 0 profits.

     

    And as for Mcandrews lol, his past performance already warns anyone of ever acquiring Pandora.

     

    And I quote:

     

    "McAndrews, ran Avenue A, a digital agency in Seattle in 1999, and built it into aQuantive, which was acquired by Microsoft for $6.3 billion in 2007 (In 2012, Microsoft took a $6.2 billion writedown on the acquisition after it failed to spur growth in the money-losing online division)." http://onforb.es/1g6T5eg

     

    Game you say? I say scam.

     

    Reality is no one needs Pandora because they have nothing of value that competitor or a start up can't replicate on its own.
    4 Jun, 08:17 PM Reply Like
  • itscalledcommonsense
    , contributor
    Comments (520) | Send Message
     
    "Would love to see it, I get P fair value mid 60s, heck I get high 30s with no further usage growth"

     

    Using multiples of what? Songs skipped?

     

    When you are unprofitable and your gross margin is 30% and your sales and marketing expense is 30% and S&M expense growth is 80% of revenue growth each quarter (and always has been) why should I pay 10x revenue and infinityx earnings? What is the model change that makes me pay this?
    4 Jun, 11:52 PM Reply Like
  • bpork
    , contributor
    Comments (45) | Send Message
     
    you two are still at it? :|

     

    It's about making money - not being right
    4 Jun, 01:26 PM Reply Like
  • dgulick
    , contributor
    Comments (1348) | Send Message
     
    Lol. But those are correlated, whoever is right is going to make money, no? (not sure what I'll do after manic's margin call, lol).
    4 Jun, 01:36 PM Reply Like
  • bpork
    , contributor
    Comments (45) | Send Message
     
    for sure :) but you're not expected to be right 100% of the time from what some investing legends have said

     

    I just see you two on like every piece of Pandora news.. good luck to all
    4 Jun, 01:52 PM Reply Like
  • Gnbkpt
    , contributor
    Comment (1) | Send Message
     
    It's easy to understand why P is stopping monthly statistic reports.
    4 Jun, 02:50 PM Reply Like
  • Kenneth Deneau
    , contributor
    Comments (9) | Send Message
     
    Could someone explain what is meant by Pandora's share of total US radio listening being influenced by seasonality?
    4 Jun, 02:50 PM Reply Like
  • SA Editor Eric Jhonsa
    , contributor
    Comments (753) | Send Message
     
    People tend to listen to traditional radio more in some months than others. Radio listening is heavily linked to driving, so months in which people drive more (such as May, which features the Memorial Day weekend) are often ones in which Pandora will have a relatively low radio listening share.
    4 Jun, 03:16 PM Reply Like
  • dgulick
    , contributor
    Comments (1348) | Send Message
     
    This distinction has already lessened with P's share of auto listening on the rise (though auto listening is currently dominated by FM and SiriusXM, in 2012 P reached 1M car activations, today they are at 5M, P available in 1/3 of new cars sold).
    4 Jun, 03:24 PM Reply Like
  • manicdvln
    , contributor
    Comments (579) | Send Message
     
    I'll explain, every time Pandora gets a bad metric numbers, it's seasonality like the Fed blaming bad economic data to weather.

     

    But if a metric is a good number, then seasonality excuse isn't used and that's just good performance.

     

    These are just tactics ANALysts and execs use to save face.
    4 Jun, 04:40 PM Reply Like
  • manicdvln
    , contributor
    Comments (579) | Send Message
     
    Pandora auto listening, what a crock of BS. No one is listening Pandora in their car unless they want a gigantic bill from their carrier.

     

    Moreover, Apple's Carplay is quickly being adopted from almost all auto manufacturers and Apple has BLOCKED OUT Pandora.

     

    With recent news that itunes radio will also have non-music content and that Apple is also going to target Pandora business with local ads, it's matter of time which Pandora is crushed.

     

    Apple itunes Radio already has 40m users and rising while Pandora stagnates in growth.
    4 Jun, 03:50 PM Reply Like
  • dgulick
    , contributor
    Comments (1348) | Send Message
     
    "No one is listening Pandora in their car " - 5M are, I am. And that's just in-dash Pandora, if you count all online radio listening, in-dash P plus bluetooth/wired smartphones, it's more like 26% of the US population, 66M! (p. 11 of charts: http://bit.ly/1mWF0It)

     

    "Apple's Carplay is quickly being adopted from almost all auto mfgs " - Pandora is in more, and has been for years! (first Pandora car was Ford Explorer in 2010!)

     

    "Apple is also going to target Pandora business with local ads" - Local is a $10B ad market, P local ad revenue currently only 1% of this (despite 9% US radio market share and growing), plenty of room for both, though it remains to be seen if iTR gets to the scale necessary, meanwhile P is #1 radio station in 14 of top 15 ad markets and on STRATA/Mediaocean (iTR? Not yet, but eventually, FM will be the one getting crushed.)

     

    "itunes Radio already has 40m users " - this is registered users, a metric P rarely updates because it includes inactive accounts, but to get an apples-to-AAPL comparison, P has 250M users. But really, since usage is the critical metric, why do you suppose Apple won't provide the amount of iTunes Radio hours streamed? (Along with anyone else besides Pandora). Perhaps because they are nothing to brag about? \sarcasm

     

    "Pandora stagnates"

     

    Just keep trumpeting that, despite all evidence to the contrary.
    4 Jun, 05:03 PM Reply Like
  • manicdvln
    , contributor
    Comments (579) | Send Message
     
    If you give people a choice to advertise with Apple or Pandora, everyone and their grandma will go with Apple because of international exposure and most likely better pricing structure.

     

    Radio market share declined month to month.

     

    I also love these two quotes from clueless management:

     

    "We’ve lost 3.4 million subscribers and we’ve got 76 million monthly users that was in the Pandora, so it’s a minority. We’re primarily a free service, but we do offer subscription for people who wanted to add free experience, and it is growing, it is growing. But we are not primarily focused on subscription at the expense of add or vice versa we want to, whatever the listener prefers. But we do see ourselves attacking a market that is free, which is frankly a very, very large market of people who like to listen to free radio, but we also want to offer that subscription opportunity for people who choose that." McAndrews

     

    Translation we give up with subs we giving crown to Spotify.

     

    "So we are considering other countries over time, but there are challenges to be worked out in terms of figuring out what are the best countries, the best opportunities, and making sure that we figure out what the royalty structure are either country-by-country or through some of OTO.

     

    So it is something that we are looking at over time if not an immediate opportunity for us, because we really are focused in the U.S."

     

    Translation, no expansion
    4 Jun, 05:17 PM Reply Like
  • dgulick
    , contributor
    Comments (1348) | Send Message
     
    "We’ve lost 3.4 million subscribers"

     

    This was poorly transcribed, what he actually said was:

     

    "We have 3.4 million subscribers"

     

    So just the opposite! But the real reason they don't really pursue subs is they just don't really care which route people take, they are both profitable listeners. But remember, a Spotify subscription is $120/yr, P only half that and P has more subs in the US than Spotify (3M).

     

    As for expansion, they do seem to be considering it with their hire of Sara Clemens, best know for getting LinkedIn in China and her work on getting Xbox international. Also, Canada, which has been rather draconian (and as such, has no internet radio options) just released reduced royalty rates that came in at 1/10th of CRB rates, so P is looking into it. But currently, international expansion is limited by cost structures and is only available for companies that are doing direct deals, though the ice is cracking on that front as well (P now has a direct deal with UMPG).
    4 Jun, 06:06 PM Reply Like
  • manicdvln
    , contributor
    Comments (579) | Send Message
     
    Bla bla bla..... Suuuuuuure it is dgulick now these nice gentlment going to put this jacket on and they will take care of you now on.
    4 Jun, 06:26 PM Reply Like
DJIA (DIA) S&P 500 (SPY)
ETF Tools
Find the right ETFs for your portfolio:
Seeking Alpha's new ETF Hub
ETF Investment Guide:
Table of Contents | One Page Summary
Read about different ETF Asset Classes:
ETF Selector

Next headline on your portfolio:

|