Seeking Alpha

dgulick

dgulick
Send Message
View as an RSS Feed
View dgulick's Comments BY TICKER:
Latest  |  Highest rated
  • Is Pandora A Good Music Streaming Play? [View article]
    "I never mentioned content costs"

    IFPI's streaming revenue data is content costs.

    "Spotify user numbers in line with Pandora but growing faster"

    True, just says Spotify is giving more away: Spotify burned -$196M last year, one of these days Spotify will have to raise prices and put limits on their free tier (both will drive P user growth). But you also ignored my warning, all MAU's are not created equal. Based on Triton usage data, Spotify's 75M users average only 10hrs/month compared with Pandora's average user at 23hrs/month. Spotify's MAUs are just not heavily engaged compared with Pandora.

    "Spotify more sustainable as music industry is looking to get paid"

    To maximize revenue the music industry needs tiers to monetize different demographics, and Pandora is the only one that has successfully monetized the free listener. While the labels would love everyone to pay them $10/month it will never happen, and the music industry won't be turning their back on Pandora's $500M/yr any time soon.

    "effect of Apple Music"

    Yes, its early, but as Apple Music's release caused P shares to slump -25%, there is priced in an expectation of a significant long term impact. So the fact that, even with all the fanfare, Pandora app downloads on iOS soldiered on is significant: http://bit.ly/1MvXsTW and also backs up McAndrews "no meaningful impact" comments. Not to mention Apple Music's horrid reviews and antitrust subpoenas http://bit.ly/1OxiGhO

    "Facebook"

    They denied that rumor, but even so, as Google, Apple and Amazon have together had only a modest impact on P's user growth, and imperceptible effect on P's revenue growth, I'm not going to worry too much about a rumor at this point. And isn't it just further evidence that what we are seeing is a sea-change in the way big tech expects we will consume music in the future. Pandora's et al, true competitors are FM radio, CD and digital sales, which are all being laid waste as streaming's exponential growth continues.
    Jul 27, 2015. 07:08 PM | 2 Likes Like |Link to Comment
  • Is Pandora A Good Music Streaming Play? [View article]
    And lastly, on growth, if you haven't noticed everyone has launched a music streaming service (Apple, Google, Amazon), with large promotional periods of free on-demand music (Apple Music at 3 months, Spotify matched it despite -$196M loss last year http://nyti.ms/1S9qGvS ) yet to the astonishment of the uneducated, P has continued to grow in both users and usage (albeit the pace has moderated). But as these giveaways inevitably end Pandora's growth will reignite.
    Jul 27, 2015. 05:51 PM | 2 Likes Like |Link to Comment
  • Is Pandora A Good Music Streaming Play? [View article]
    Pim,
    The ifpi data you cite is on the expense side of the equation for the streamers, so concluding that higher content costs reflect a larger opportunity is wrong. In fact, if FM radio were added to that chart it would barely register (they pay artists nothing and songwriters a very small pct of rev) and yet radio represents 80% of listening and $46B/yr in revenue.

    You then conclude from this same data a "shift in focus" to subscription based services, but when one looks at usage statistics we see clear evidence of Pandora's popularity, with usage more than double Spotify: http://bit.ly/1S9kQKO . (Incidentally, this data also clears the air on all of the MAU noise on the subject, because when one considers engagement Pandora crushes Spotify, and in fact even challenges Facebook: http://mklnd.com/1DMqsAj )

    And as for growing resistance from content owners toward free services, that criticism is directed at Spotify's free tier where one could stream Taylor Swift's entire new album on the day of its release (for example), thus her decision to pull her music. Pandora is a radio service which must adhere to limits on consecutive songs by the same artists/album, etc., much less contentious to artists and actually promotes CD/digital sales as opposed to cannibalizing them as the on-demand services do (and Swift's music is on P).

    You make the same mistake many do, while Spotify and Pandora are the leaders in the music streaming revolution, they only partially overlap. Spotify's free tier is a loss leader to get subscribers (as evidenced by only 9% of Spotify's revenue coming from ads), whereas P has created a profitable free/ad-supported model. And even on the subscriber front, they are at different price points (Spotify at $10, Pandora at $5).

    The models are really chasing entirely different markets, Spotify after traditional music sales (a $15B/yr opportunity), Pandora after the radio market ($46B/yr ad market and *radio* subs (SiriusXM), a $5B/yr opportunity). So in addition to being wrong on Pandora as an investment, you are wrong on what their strategy should be as well.
    Jul 27, 2015. 05:23 PM | 2 Likes Like |Link to Comment
  • Pandora: Investors Should Be Patient [View article]
    Spotify rates are 2-4x Pandora's rates, but of course, Spotify is on-demand music whereas Pandora has to adhere to webcaster restrictions (limited # of skips, only 4 tracks by the same artist within a 3 hour period and no more than 3 of those tracks may be transmitted consecutively, etc).
    Jul 27, 2015. 12:03 AM | Likes Like |Link to Comment
  • What Questions Pandora Answered In The Second Quarter [View article]
    Remember that increasing ad load (which in addition to CPM improvements led to the +30% y/y ad rev gain last q) drives their ad-free Pandora One subscriber growth (sub rev +31% y/y).
    Jul 26, 2015. 08:02 PM | 2 Likes Like |Link to Comment
  • What Questions Pandora Answered In The Second Quarter [View article]
    No, I don't think it got mentioned, in fact I think they are downplaying it due to negative PR and have even changed their statement to "makes sense to us beyond the licensing parity alone" (really? lol.) But P now is the assignee of the former owner's RMLC rates for "alternate transmission" and is already using it in the BMI case: http://bit.ly/1Ip9rjB
    While ASCAP and BMI continue to try to paint Pandora as "undercutting artists" with this "stunt", the PROs find themselves in the awkward position of having to explain why it is they offer lower rates to Pandora's direct competitors!
    Jul 26, 2015. 03:31 PM | 1 Like Like |Link to Comment
  • What Questions Pandora Answered In The Second Quarter [View article]
    You might be thinking minutes/hr not ads/hr as most of their ad slots are :30, but Pandora has had a max ad load of 6 ads/hr since at least 2012 or so, they just never had enough ads to fill their slots until now (and even today still have gaps in many markets, thus the 100 new ad sellers hired in the past year).
    Jul 26, 2015. 12:28 PM | 1 Like Like |Link to Comment
  • Why Pandora Is Subject To A Further Downward Correction [View article]
    Beta,
    When I said "opportunity in the US" I was referring to monetization. The reason P hasn't gone beyond the US (except for AUS/NZ) is the opportunity is enormous, highest per capita and highest total ad spend in the world by a large margin: http://bit.ly/1Ip5xqR
    (and AUS/NZ have a very favorable per capita ad spend as well).

    As for data, mobile broadband has been doubling in speed every ~2.3 yrs since the first cell phone in 1991, today, LTE-advanced can deliver 100s of Mb/s even though it only takes a 5Mb/s connection to stream a 1080p HD movie! Speeds have increased 25x since the iPhone was introduced in 2007. My point is, pricing is coming down on a per Mb basis and data caps are growing/going away in the coming years as the infrastructure is built out (15,000 new cell towers went up in 2014), Moore's law applies here. Yes, FM radio is established and inexpensive, but the quality of the product is just not there (static, linear programming, no thumbs/skips, egregious ad load, etc).

    Good luck with your P long, been a shareholder since 2012 when shares were $8 and definitely regretted not having bought more as shares ripped to 30s within a year! But this slide has provided a second opportunity. CRB rate setting in December could be an enormous catalyst, but a couple more quarters like the last one will provide incremental gains as well.
    Jul 26, 2015. 12:26 PM | 1 Like Like |Link to Comment
  • What Questions Pandora Answered In The Second Quarter [View article]
    Beta,
    Great insights into the targeting capability of P. Regardless P stands to gain purely from the perspective of the disconnect between time spend and ad spend as all mature ad outlets: print, TV, radio, and now even desktop internet are declining in both use and ad revenue: http://bit.ly/1lUg6mm p.16
    (to say nothing of ROI erosion from FM channel flipping in the car or DVR fast-forwarding of commercial TV)

    Also agreed on broadband. As mobile data continues its march to commodity pricing the traditional radio services (FM and SiriusXM) will begin to feel pressure even more than they are today, in the same way that home broadband ubiquity over the past decade allowed the SVOD space (Netflix, etc) to compete effectively with cable providers. (The music space benefited from home broadband as well, but music is more of an "on-the-go" medium, and, as the car is the final holdout for FM and SiriusXM, the connected car poses a very real challenge to them).

    As for P starting a music label, P already has direct deals with Merlin (umbrella for indies), BMG and Naxos that has provisions for a reduction in P's per play cost the more they spin their music. So P really doesn't need to own the label, just deals with those that recognize the value of discovery by P's 80M listeners.

    And while the big 3 labels are leaning toward some form of windowed release in the same way as movies (first release to theaters, then DVD sales/Redbox rental, then a-la-carte SVOD (Amazon, Apple, Vudu), then all-you-can-eat SVOD (Netflix, Amazon Prime), the labels can't deny their music to webcasters due to statute, they can only withhold rights from other on-demand streamers (Spotify, Rdio) (the drawbacks of the antitrust violations from joining a PRO).

    And yes, threat of CRB rates have kept P investors at bay, but the judges are bound by law to consider all of the direct deals the labels have cut (Apple got inline rates for iTunes Radio, iHeartRadio has over 25 direct deals leveraging their position in the FM space, Pandora's deals, etc) providing for a rather tight band of uncertainty on the outcome of these proceedings (not that you would know that from media coverage).
    Jul 25, 2015. 05:06 PM | 1 Like Like |Link to Comment
  • What Questions Pandora Answered In The Second Quarter [View article]
    P's current % of US radio is worth $2B/year at FM ad RPMs, but being a connected service P has better targeting and also offers display/rich media ads (will get to higher RPMs than FM). Also P achieved all of their growth with no advertising as opposed to Beats' Super Bowl ads and Apple's two "launches" (one for iTunes Radio, and recent Apple Music) yet netting negligible market share. As P monetization continues they will start advertising the service and resume growth.
    Jul 24, 2015. 08:30 PM | 2 Likes Like |Link to Comment
  • What Questions Pandora Answered In The Second Quarter [View article]
    "Pandora hasn't grown at all"
    P raised full yr revenue guidance +$10M, again.

    "total listening hours is flat"
    due to product improvements resulting in lower song skipping (and lower royalty expenses)

    "active users lost 2.4m since peak"
    due to seasonality (and Q4 was no peak, they will exceed it this year, and the next, etc)

    "earnings loss widened"
    due to growing the business (added 441 (+34%) employees in the past year)

    "radio market share DECLINED"
    seasonality and product improvement resulting in lower song skipping

    "impact of Apple hasn't even begun"
    Apple Music launched over 3 weeks ago with no small amount of fanfare, yet according to P CEO "we aren’t seeing any meaningful listener impact at this time and we don't expect any long-term meaningful impact either", to back it up raised guidance. Not to mention Apple Music getting savaged by critics http://read.bi/1CZIuT7

    "100m active user goal is near impossible"
    actually what he said was "that goal is completely achievable"

    "content costs will rise significantly"
    actually what he said was "adjustments to our playlist technology...resulted in...decreasing corresponding content cost."

    "15 yrs of fiscal losses"
    P was ahead of its time waiting for mobile broadband to be invented, but they turned the corner with this last report, you will not be able to make that statement much longer.
    Jul 24, 2015. 07:55 PM | 7 Likes Like |Link to Comment
  • Pandora Earnings Preview: Increasing Competition Is A Concern [View article]
    @blake, just caught your belittling comment above, I'm perfectly aware of non-GAAP games and that current expenses are higher than revenue. But I believe, as many do, that at full operation this won't be the case (and btw, ttm rev grew +33% vs. +32% for exp), but until that point P is going to spend every spare dime growing the business, so spare me all your expanding losses crap. I also believe international expansion is inevitable, P provides monetization of the piracy crowd, something the music industry isn't going to turn its back on even if they "win" CRB. Short away, its your money.
    Jul 24, 2015. 06:21 PM | 1 Like Like |Link to Comment
  • Pandora Earnings Preview: Increasing Competition Is A Concern [View article]
    Apple Music launched less than a month ago, but as it is merely Beats Music (inferior Spotify clone launched 19 months ago, with very poor reception and low usage) glommed on to iTunes Radio (inferior Pandora clone launched 22 months ago, also with very poor reception and low usage), with some buggy iCloud feature that is deleting/DRM-ing people's purchased music, that really doesn't bode well for the product. Tim Cook is watering down the sensation creating impact of "launches" that Steve Jobs created.

    In case you missed it:
    http://bit.ly/1CYZ5B5

    And probably one of the more interesting things I read today, keep in mind I'm an AAPL shareholder as well, but check out the comment by @rogifan, he nails it:
    http://bit.ly/1CZR2JN
    "If not having a dedicated SVP Cloud Operations for any $300B+ company were a crime, for how long would Apple go to jail?"

    (Also, McAndrews didn't mention it, he was simply responding to a direct question from an analyst, listen for yourself: http://bit.ly/1CZRJma )
    Jul 24, 2015. 05:53 PM | 2 Likes Like |Link to Comment
  • Pandora Earnings Preview: Increasing Competition Is A Concern [View article]
    "it is crime when it's going for 15 years with IPO price of 16$ when it was intended for 6$ and then a secondary offering of 25$"

    That's not a crime either. $6 is your opinion, and you've got your money where your mouth is. Others think $16 and $25 were good entry points and they gave P mgmt their money to grow the business. And those investors are not gullible, they're big boys. And if others bail along the way because they change their minds, that's fine too, even better entry point if one still thinks upside could be substantial (I've given you my 5 yr PT, but growth doesn't slow much in the next 5 yrs either).

    As for "NO growth", you can try to spin their seasonality all you want, but at IPO, P's share of US radio was 3%, they've tripled that. So what if only 2/3 of the 5M that tried P for the first time in the 4th quarter stuck around, you're in the weeds! Here's a clue, look at annual revenue, +400% since IPO!

    But what will drive share price from here more than anything is this:

    Apple Music getting savaged by critics
    http://read.bi/1CZIuT7 http://bit.ly/1CZIx1l
    "I love Apple...but Apple music is a nightmare" (keep in mind this is a fanboy!)

    And of course, this:
    "Pandora's CEO says he's not worried about Apple Music"
    http://read.bi/1CZIx1m http://bit.ly/1VFesdG
    "we aren’t seeing any meaningful listener impact at this time and we don't expect any long-term meaningful impact either"

    With all the fanfare around the Apple Music launch P isn't seeing any meaningful impact? Are you kidding me? But it's pre-installed on iOS, and it's free on-demand music!! (and comes with a U2 album! Lol).

    P shares heading up.
    Jul 24, 2015. 04:59 PM | 2 Likes Like |Link to Comment
  • Pandora Earnings Preview: Increasing Competition Is A Concern [View article]
    Is that all you got from their report blake? You act like its a crime to build a business with capital. News flash, it's the way its been done for centuries and brought to the world amazing companies like J.P.Morgan, GE, Ford, Boeing, Berkshire Hathaway, IBM, Apple, Amazon, Google (would you have shorted those in their pre-profit days with concerns over diluted share count?). P employs 1700 with $1B ttm rev, half of which they are returning to artists, $1.5B to date, creating a music service that 80M enjoy every month. Tell me what's wrong with that?
    Jul 24, 2015. 03:03 PM | 2 Likes Like |Link to Comment
COMMENTS STATS
1,992 Comments
1,303 Likes