Pandora expects to exceed revenue forecasts

Image: Tim Westergren

Due to advertising growth and a rise of subscribers for its streaming service, Pandora founder Tim Westergren has predicted that fourth-quarter revenue will be higher than the company forecast.

After returning to his post last year, Westergren’s strategies appear to be paying off for the platform, which is also believed to be cutting a portion of its US workforce in early 2017.

Westergren expects the revenue to hit US$374 million (AU$498.7 million) from $362 million (AU$482.7 million). The report is due out on February 9 with analysts expecting the number to be $369.6 million (AU$492.8 million).

The news saw Pandora’s stock move up 7% to US$12 (AU$16) a share. However, this figure remains 66% lower than its peak in February 2014.

Last September, after direct deals with record labels and publishers, the company replaced their Pandora One service with the ad-free $5 a month Pandora Plus.

In the three months to end of December, Pandora Plus gained 375,000 new subscribers, making a total of 4.3 million paying users (Spotify had 40 million as of last September).

The California-based Pandora’s online radio service has 78 million active users.

“Now, with all of the elements of our strategy in place, we are in the best position possible to expand our listener base, drive engagement and deliver significant value to all of our stakeholders,” said Westergren.

He added: “This excitement and engagement bodes well for the introduction of Pandora Premium later this quarter.”

Pandora Premium, a $10 a month tier, will take on Spotify Premium and Apple Music. These particular services have taken away some of Pandora’s subscribers due to the ability to pick and choose songs.

At the same time, Pandora intends to be in a position to be able to increase investment in new features and products that will draw more subscribers. The cost, however, will be a reduced workforce. By the end of Q1 2017, at least 7% of the US workforce will be cut.

Based on December 2015 figures that cite Pandora’s 2,219 strong workforce, this would mean about 155 roles will be shaved.

“While making workforce reductions is always a difficult decision, the commitment to cost discipline will allow us to invest more heavily in product development and monetization and build on the foundations of our strategic investments,” said Westergren.

Pandora will also create more revenue by leveraging its analytics platform and ad insertion logic. In order to appeal more to consumers, some analysts have suggested that Pandora adopt a more cost-efficient model. The company has held talks with Sirius XM and Liberty Media in the past, but it is unclear as to whether any deals will eventuate.