Pandora shares dive as co-Founder returns as CEO

Music streaming company Pandora Media’s shares dived 10% to US$9.60 (A$12.75) after the news that Founder Tim Westergren (pictured) is returning as CEO, replacing Brian McAndrews, as part of a major management restructure.

But Pandora believes it can turn things around. It has plans to invest US$345 million ($458 million) this year to widen its paid subscription service and enter new markets to increase revenue. Last year it grossed US$1.164 billion ($1.5 billion), a 26% rise from the year before. It has a target of US$4 billion ($5.3 billion) by 2020.

But it is dogged by persistent rumours it is up for sale after massive losses. But Westergren’s return and other management changes suggest that a change in ownership is not on the books. Pandora has always insisted its aim was to become an independent company.

Westergren said in a statement, “I am incredibly excited about the future of Pandora. We’re on the cusp of realising an extraordinary vision: fundamentally changing the way listeners discover and enjoy music, and the way artists build and sustain their careers.

“We are pursuing a once-in-a-generation opportunity to create a massive, vibrant music marketplace. We have the audience, the technology infrastructure, the monetisation engine and most importantly the right team with the passion and commitment to do it.”

Westergren co-founded Pandora in 2000 with Will Glaser and Jon Kraft. He served as its CEO from 2002 to 2004. He spearheaded Pandora’s development of its Music Genome Project, which drives its listener-specific recommendation software. After he stepped down as CEO, he was its Chief Strategy Officer until 2014, and served on the company’s board of directors since the beginning.

US-based Pandora is only available in Australia, the US and New Zealand. It has 81 million active users, most of them in the US. Pandora’s dilemma is that with growing competition from Spotify, Apple Music and Amazon.com Inc, it has to draw more (paying) subscribers to increase its revenue. It has to expand to new territories and launch a subscription, on-demand tier to fire up revenue.

This means striking licensing deals with record companies. Until recently, Pandora’s relationship with them was lacklustre. Labels were angry that its online radio service operated under the US Government’s pay rate rather than one struck directly with them. Last year, they were annoyed with the rate offered by Pandora for its subscriber service, which was apparently less than those offered by other services.

While McAndrews has started forging closer ties, Pandora is hoping that Westergren’s background as a musician and a film score composer – he played keyboards with soft rock band YellowWood Junction – and his undeniable charisma will effectively finalise more deals. Analysts say that while McAndrews was ambitious, Westergren’s approach tends to be deliberate, suggesting that it will be at least another 12 months before Pandora shows a turn-around.

McAndrews commented, “I am honored to have been the CEO of Pandora for the past two and a half years, and I am proud of what I and our team of talented and highly passionate colleagues have achieved during this time. We have put in place a robust strategy to make Pandora the go-to source for fans and artists and position the company for long-term success in a highly dynamic space. With the team and strategy in place and execution underway, I am passing the baton on to Tim.”

No specific reason was given for McAndrews’ exit. He lead online display advertising company aQuantive Inc, which Microsoft Corp bought in 2007 for $6 billion ($7.9 billion) after paying an 85% premium. He joined Pandora in September 2013, as it moved into streaming.

During his tenure, Pandora’s value fell from $7.73 billion ($10.26 billion) to $2.26 billion ($3 billion). Last month, it reported a disappointing quarter, revenues down $169.9 million ($225.6 million) and active listeners slightly down to 81.1 million. After peaking at $37.42 ($49.69) in February 2014, shares slumped more than 70%, with a 32.5% drop in the last 12 months.

As part of its latest change in management and responsibilities, board member Jim Feuille is now Chairman. Chief strategy officer Sara Clemens is promoted to Chief Operating Officer to work on “new ventures.” President and Chief Financial Officer Mike Herring will focus on monetizing Pandora’s core business. Chief Product Officer Chris Phillips will handle product and marketing.

In a formal statement, Pandora explained that the changes would ”accelerate the company’s growth strategy.”