Pandora planning more global expansion

With rising competition from its younger rivals, US-based online radio and streaming service Pandora is eying entry into more global markets. A return to the UK market seems a key part of its strategy.

Reports this week say its preliminary talks with copyright holders in new territories saw Pandora’s stock price go up 4%.

Until 12 months ago, the fact that Pandora is only available in Australia, the United States and New Zealand has not hurt its numbers. By last year it had 250 million registered users (175 million of these in the US) and 81.5 million active users. The company is on target to generate over $1 billion this financial year.

A further global expansion didn’t seem to be high on its list of boxes to tick. Last year its CEO Brian McAndrews said, “I think international is something that we do feel there will be opportunities in the medium to longer term.”

But that was before the arrival of Apple Music, which is in nearly 120 countries and already scored 15 million users.

Apple certainly had an impact on Pandora. In its latest quarter, Pandora served 5.14 billion hours of content to 78.1 million active listeners. Three months before, that figure was 5.3 billion hours served to 79.4 million active listeners.

Spotify too is an emerging rival, even if it is still weaker in America. But it is available in over 60 countries and, as of June 2015, had more than 75 million active users. It may have fewer users than Pandora but it has convinced 20 million to become paying customers. As a result, the Swede’s market value is $8 billion while Pandora’s is $3.5 billion.

Pandora’s sales this quarter will be $325 million to $330 million, Pandora said, less than the $351.5 million average of estimates compiled by Bloomberg.

Pandora is not expected to re-enter the UK until mid to late 2016. It left that market in 2008, citing excessive streaming royalty rate demands.

The question of royalty rates has seen it at odds with the major labels, which are angered that it relies on rates set by government regulators rather than the companies themselves.

But of late – presumably because it realises that its global ambitions depend on working with the likes of Sony, Universal and Warner – it has adopted a more conciliatory approach.

Last month it reached a $90 million settlement over tracks recorded before 1972. A “modernised” licensing deal with Sony/ATV saw CEO Martin Bandier promise “significant” royalty rises for his signings. The deal is expected to lead to talks with other major publishers.

Analysts say that a more harmonious relationship with the major companies could see Pandora be granted permission to features that allow users to store songs on mobile phones or skip songs if they agree to listen to more ads.

Meanwhile it continues to introduce additional ways to turn its users into subscribers. Among these has been one which makes it easier to find the latest music released that week.

At this week’s M1 Summit Mobile Conference in San Francisco, its VP for Growth Marketing Lisa Sullivan revealed that an offline feature is “something we’re looking at.” She would not go into specifics or when it would be introduced. She would only say, “We know our customers want it.”

Spotify and Apple Music have offline features too but these are generally dismissed as complex and dull experiences.

Pandora is also expected to expand further into the live sector. Its newly acquired ticketing platform Ticketfly allows artists to see where their hottest fan bases are, message them about events, and sell directly to fans.

This is a feature that Pandora is using as it pushes into a greater presence in the US country music scene— the second largest after rock (selling 30.46 million albums) and out front of pop and dance.

In an interview this week with Entertainment Weekly, founder Tim Westergren explained, “The great beneficiaries (of Ticketfly) will be touring musicians, which country music is well known for. I think of country as working-artist genre. These artists play out. It’s not like they book a few arena dates a year and that’s their shtick. It’s a culture of performance — and that’s absolutely our sweet spot.”