Pandora keeps drawing more listeners to its streaming music service, but it's been struggling with the fact that music licensing fees have been outpacing advertising revenue growth.
When Pandora reports earnings after the bell Thursday Wall Street expects the streaming music company to report fifty one percent higher revenue than a year ago of $123 million, on the loss of five cents per share, a loss of two pennies more than a year ago. Investors and analysts will be paying particularly close attention to the company's outlook-- looking for signs of whether the company can start to reverse the trend.
Pandora's earnings come on the heels of a couple of new moves to generate higher revenue and profits. This week the company announced it will start including its ratings on Strata Marketing's systems, allowing Pandora to directly compete with radio stations for a piece of their $14 billion dollar radio ad market. Now that their ratings will compete head to head-- rather than requiring buyers to separately search Pandora ratings, this will make it much easier for ad buyers to try Pandora's ads. With expectations this will vastly expand it's business, Pandora announced plans to open up sales offices in the nation's 25 largest media markets.
And just last week Pandora announced it will cap free mobile listening after 40 hours a month. Co-founder Tim Westergren said this will impact less than 4 percent of total monthly active users, and that this move is part of a plan to address rising costs. Pandora says it's paying more than 25 percent higher royalty rates for tracks over the past three years, and that they expect another 16 percent increase in the next 24 months.
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These moves come as Pandora faces more competition. In addition to the likes of startup Spotify,Apple (AAPL) is working on an ad-supported subscription service and Google's YouTube (GOOG) is reportedly planning to launch a subscription music service later this year. Because tech giants have pre-existing relationships with the music industry they are likely negotiating their own, presumably lower costs, rather than following the government-regulated Internet radio terms.
Pandora's active user base slipped between December and January-- from 67.1 million to 65.6 million. Investors will be looking for users to return to accelerating growth, and for color on what the changes will mean for the company's botom line.