Shares for internet radio and music streaming service Pandora dropped by 15% (40 cents) last night after it reported an expected quarter loss of US$85.9 million.
Its revenue of $311.6 million narrowly missed analyst estimates of $313 million but still marked a 30% year-over-year increase.
The report showed Pandora is in growth. Ad revenue was up 31% year on year to $254.7 million and subscription and other revenue up 26% to $56.9 million. Total listener hours rose 3%.
Yesterday, Pandora also announced it reached a $90 million settlement with music labels – including the three majors Universal, Sony and Warner – over the streaming of pre-1972 audio and songs. Negotiations lasted two weeks.
US federal law protecting copyright only applies to music recorded on or after February 15, 1972. The only protection was by a patchwork of state laws.
The deal follows a similar settlement by satellite radio provider Sirius XM, which agreed in June to pay $210 million over pre-1972 songs after the Recording Industry Association of America (RIAA) also took it to court.
Both had previously insisted they were exempt from these payments as current federal law does not require terrestrial radio broadcasters to pay performance royalties to acts and labels. Both stopped paying royalties some years ago. Pandora says pre-1972 music makes up 5% of its content while Sirius puts its figure at 15%.
The Pandora settlement is retroactive. It will pay for all the pre-1972 music it played in the last few years. At the end of 2016, it will strike fresh licensing deals with the labels to cover the pre-1972 era.
RIAA Chairman Cary Sherman, responding to the Pandora deal, called it “a significant milestone and a big win for the music community.”
He added, “Major settlements with Sirius XM and now Pandora means that an iconic generation of artists and the labels that supported them will be paid for the use of their creative works.”
Pandora Media Inc CEO Brian McAndrews, CEO of Pandora, explained his company wanted a “better, collaborative relationship” with the labels. “Together we share a common objective to grow the music industry and support artists.”
But Pandora still has legal issues with oldies acts who own their master recordings.
It is battling a $25 million class action lawsuit filed by ‘60s band The Turtles. The band is best known for hits as 1967’s Happy Together and 1968’s Elenore. They want compensation for lack of payment, and also sued Sirius XM for $100 million for reproducing their material without permission.
The Turtles’ attorney states, “Pandora is still exposed.” The company suggests that its deal with the majors will reduce the size of the band’s lawsuit.