Pandora’s founder and newly-appointed CEO Tim Westergren had a bold message for investors Thursday: Don’t worry about losses right now. Instead, think of Pandora as the music industry’s equivalent of Netflix, which built its streaming service with the money it made from DVD rentals. Or Amazon, which wasn’t profitable for years as it built its cloud and media businesses with the money it made shipping books and CDs.
Westergren made these remarks as part of his first earnings call as a CEO after the company parted with previous CEO Brian McAndrews last month. Pandora’s Q1 earnings did help to make Westergren’s case, with the company growing revenue 29 percent year-over-year to $297.3 million dollars, which was more than analysts had expected. He forecasted that Pandora will be able to generate more than $1 billion in revenue with its core radio service alone this year.
Pandora’s numbers benefitted from a big growth in ad revenue, which grew to $220.3 million for the quarter, up from $178.7 million for the same quarter last year. Pandora investors liked these results, and set the stock up 11 percent in after-hours trading.
However, the company is still losing money, and in fact more than doubled its adjusted losses from $20.9 million to $57.4 million for the quarter. Part of this has to do with increased investment in new businesses, but Pandora is also still paying 58 percent of its total revenue to music rights holders.
Pandora acquired failing music subscription service Rdio late last year, and is now looking to launch an on-demand service that can better compete with Spotify and Apple Music before the end of the year. Executives didn’t share many new details on the service Thursday, but CFO Mike Herring said that Pandora’s goals was to offer different tiers once the subscription service is ready to launch. “There is a spectrum of pricings and offerings that we would like to bring to the market,” he said.
COO Sarah Clements added that Pandora’s team is working on building a product that will look very different from existing subscription services. “You can count on us to reinvent the on-demand experience,” she said.
Of course, to pull this off, Pandora still needs to actually strike deals with the record labels. Westergren said that he met with senior executives of all major labels this month and seemed optimistic to get everything in line before a launch. At that point, Pandora wants to offer a multitude of services ranging from its existing free radio product to paid subscriptions to tickets.
That is if the company actually stays an independent business, one should add. The New York Times reported in February that Pandora has had sales talks with unidentified potential buyers. Westergren didn’t address this possibility at all Thursday, but admitted that things haven’t always been easy for the company. “Yes, we have had a rough couple of years, and there are plenty of doubters,” he acknowledged, while insisting that everyone within the company was committed to the business.