Pandora: Mobile ad revenues surge 101%, outpacing listener hour growth


Pandora Media reported first-quarter fiscal 2014 revenues of $125.5 million, a 55 percent year-over-year increase fueled by the continued growth of the streaming music service's mobile advertising efforts. Losses nevertheless widened to $28.6 million from $20.2 million during the year-ago period as content costs jumped 48 percent to $82.9 million.

Listening on mobile and other connected devices increased 47 percent during the quarter and accounted for 79 percent of total listener hours, Pandora said. "For the first quarter, total mobile revenue on a non-GAAP basis, including advertising and subscription based revenue, grew 101 percent to $86.7 million, from $43.2 million in the same quarter last year," Pandora Chairman and CEO Joe Kennedy said on the company's earnings call Thursday, according to a Seeking Alpha transcript. "As a result of our focus on driving mobile monetization total mobile RPM [revenue per 1,000 impressions] on a non-GAAP basis reached $26.15, compared to $19.16 in the first quarter last year. Mobile monetization continues to be a core focus, and our RPM growth is a clear demonstration of the progress we have made."

Pandora subscribers increased 114 percent year-over-year. "During the quarter we added more than 700,000 net new subscribers, more than we added in all of fiscal year 2013," Kennedy said. "And Pandora's over 2.5 million subscribers, almost half, have now been generated on mobile devices."

In late February, Pandora imposed a 40-hour monthly listening limit on its free mobile streaming music service, a move to address mounting royalty fees. "Pandora's per-track royalty rates have increased more than 25 percent over the last three years, including 9 percent in 2013 alone and are scheduled to increase an additional 16 percent over the next two years," founder Tim Westergren said at that time. "After a close look at our overall listening, a 40-hour-per-month mobile listening limit allows us to manage these escalating costs with minimal listener disruption."

The cap has worked as intended, Kennedy said Thursday. "We saw an increase in total active listeners and a deceleration in total hours streamed, enabling us to manage our content acquisition cost with minimal impact on listenership or revenue growth," he explained.

Subscription-based and free Internet radio services accounted for 23 percent of average weekly music listening time among U.S. consumers between the ages of 13 and 35 during the fourth quarter of 2012, up from 17 percent in the year-ago period, according to a recent NPD Group report. The free version of Pandora led all streaming music services during the quarter, representing 39 percent of total usage.

Moving forward, Pandora will face new competition from rivals including Google (NASDAQ:GOOG), which launched its Google Play Music All Access streaming music service last week. Another contender is Apple's (NASDAQ:AAPL) much-rumored iRadio, which reportedly boasts functionality modeled on the Pandora platform.

For more:
- read this release
- read this Seeking Alpha transcript

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