Pandora's Royalty Costs Outgrow Its Revenue

Yesterday was a busy day for Pandora. The company’s CEO Joe Kennedy surprisingly announced his resignation before reporting decent results for the fourth quarter of fiscal year 2013 (Pandora’s fiscal year ends January 31).

The popular internet radio continued to grow healthily in the past three months, but failed to turn a profit. Pandora has 65 million active users and total listening hours increased 52 percent over last year’s fourth quarter. The company now accounts for 77 percent of online radio listening and 8 percent of total radio listening in the United States. Revenue grew 54 percent to $125 million of which an impressive $80 million or 64 percent came from mobile usage.

The main problem with Pandora’s business remains the ever-growing cost of royalties and licensing fees. In the fourth quarter, content acquisition costs grew 59 percent, eating up more than 60 percent of the company’s revenue. After the Internet Radio Fairness Act (IRFA), which would have lowered licensing fees for internet radio services in the United States, didn’t get passed by the 112th United States Congress, Pandora recently reintroduced a 40-hour listening cap for mobile users with free accounts in order to limit escalating royalty costs.

Above chart illustrates the unhealthy relationship between Pandora’s revenue growth and the growth of its royalty costs. It will be interesting to see if the new listening cap will help to limit costs without hurting revenue growth.

Description

This chart illustrates the problem behind Pandora's business model: the company's content acquisition costs grow quicker than its revenue.

Download Chart
Premium statistics
Energy and sports drink revenue growth worldwide 2019-2029
Premium statistics
LVMH Group: Fashion & leather goods revenue growth Q1 2023 - Q1 2024
Premium statistics
LVMH Group: Watches & jewelry revenue growth Q1 2023 - Q3 2024
Premium statistics
Organic revenue growth of LVMH Group Q4 2023 - Q3 2024, by region
Premium statistics
Flipkart revenue growth FY 2014-2023
Calzedonia Group: annual revenue growth rate 2010-2023

Any more questions?

Get in touch with us quickly and easily.
We are happy to help!

Do you still have questions?

Feel free to contact us anytime using our contact form or visit our FAQ page.

Statista Content & Design

Need infographics, animated videos, presentations, data research or social media charts?

More Information