By Nicola Leske
March 6 Online streaming music service
Pandora Media Inc said it will remain in the red for at
least another year, wiping nearly half a billion dollars off its
Ironically, the bigger Pandora's audience gets, the more it
must pay record labels in licensing fees, hurting the mostly
free radio service's chances of becoming profitable.
Initially known as SavageBeast, the company's mostly free
service recommends different songs based on a listener's
It faces competition from the likes of traditional radio
companies such as Clear Channel, satellite radio provider Sirius
XM Radio Inc, as well as Spotify, which allows users to
integrate its streaming music through Facebook.
Major established companies such as Google Inc,
Apple Inc and Amazon.com Inc also offer
popular music services.
Nevertheless, Pandora's top executive seemed undaunted and
while the company has never made an annual profit, Chief
Executive Joe Kennedy promised that the company had "just
scratched the surface of a $37 billion U.S. market potential."
Kennedy told analysts on Tuesday that Pandora's radio market
share in the United States of 5.5 percent -- up from 2.7 percent
within the past year -- showed that it had evolved "from being
not particular relevant to being very relevant" over the course
of a year.
But that has yet to translate into earnings.
For the current quarter Pandora estimated an adjusted net
loss of 18 to 21 cents per share, a far cry from the average
analyst forecast of a loss of 2 cents according to Thomson
Kennedy said that the first quarter was traditionally
sluggish as advertising spending at the start of the year was
For the full fiscal year ending January 2013 Pandora, over a
decade old, estimated a loss, adjusted for items, of 11 to 16
cents per share.
Pandora reported a record 71 percent rise in fourth quarter
revenue and estimated fiscal year 2013 revenue of $410 million
to $420 million, in line with the average analyst forecast of
The company said it sees quarterly revenue of $72 million to
$75 million versus analysts' average expectation of $86
Pandora shares - which debuted at $16 when the company went
public in June last year - fell to $11.24 in extended trading
after closing 2.7 percent lower at $14.27 on the New York Stock
"It looks like the Street is concerned with their guidance,"
said James Goss, analyst at Barrington Research.
Total listener hours grew 99 percent to around 2.7 billion
in the fourth quarter and advertising revenue jumped 74 percent
to $72.1 million.
"Our ad revenue on mobile devices quadrupled to over $100
million from $25 million," he said. "This places us second only
to Google in mobile advertising."
For the time being Pandora was not planning to expand in
Europe, where rival Spotify is hugely popular, Kennedy said.
Pandora said that fourth quarter revenue surged to $81.3
million from $47.64 million a year earlier. Analysts had
forecast $83.1 million, according to Thomson Reuters I/B/E/S.
Pandora itself had estimated fourth-quarter revenue of $80
million to $84 million.
On a GAAP basis, it had a net loss of 5 cents per share.
Adjusted for items the net loss was 3 cents per share.