Pandora CFO Expects To Shrink Royalty Costs To 40% Of Revenues

Mike Herring

Music royalty costs continue to haunt PANDORA, but CFO MIKE HERRING told an investor conference sponsored by ROTH CAPITAL PARTNERS in DANA POINT, CA that the company expects the rates it pays to artists and record companies to decline to 40% of revenue from the current 60% now. BLOOMBERG reports PANDORA "expects to reach that target over the next few years."

"The company is tackling royalty rates and seeking to boost the revenue it gets from advertising," notes BLOOMBERG. "With targeted ads and interactive features, PANDORA is able to levy a premium over radio spots, HERRING said. The company is working to close the gap between its ad revenue, now at about 1% of the radio industry’s total, and its 8.5% listener share."

Paying for the music it plays is PANDORA's largest expenditure, with 61% of the company’s $125.1 million in revenue paying that bill in the last quarter.

HERRING also noted that PANDORA is preparing for "a long debate" on setting royalties for 2016 and beyond.

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