Pandora Media shares tumbled more than 11% in after-hours
trading before paring the loss to about 6% Thursday evening, highlighting
investor uncertainty amid the music industry's fast-changing landscape.
Pandora's volatile stock has more than doubled since the
start of the year, but investors bailed Thursday after the Internet-radio giant
reported that its fiscal second-quarter loss widened and narrowed its
third-quarter earnings guidance. For the third quarter, Pandora forecast
adjusted earnings between three cents and six cents a share according to Hannah
Karp at wsj.com.
Pandora's chief executive, Joe Kennedy, said in an interview
that the after-hours volatility showed the market was sorting through the
information. He pointed out that the company nearly doubled its
mobile-advertising revenue for the quarter, and added that the narrowed
earnings guidance was indicative of the company's desire to reinvest "a
good part" of its earnings in ad sales and product development.
The company reported record revenue, up 58% from the year
earlier period, and raised its third-quarter revenue forecast to $179 million
from $174 million.
Joe Kennedy |
But, writes Karp, Pandora executives' bravado on recent earnings
calls hasn't jibed with the more dismal picture the company has painted as it
has lobbied lawmakers to reduce the royalty rates it must pay artists, record
companies and music publishers for the digital use of their songs. Pandora uses
a compulsory license from the government to use music digitally at rates
determined by a panel of federal judges, and the rates it pays are generally
higher than those paid by terrestrial radio broadcasters, which Pandora
considers its closest competitors.
Pandora is involved in two separate lawsuits over royalty
rates, one it initiated against the American Society of Composers, Authors and
Publishers, known as ASCAP, last year and the other brought by Broadcast Music
Inc., or BMI, several months ago, following Pandora's purchase of a terrestrial
radio station in a bid to qualify for the lower rates broadcasters pay to use
music digitally. Court decisions aren't expected until 2015.
Total listener hours: Total listener hours grew 18% to 3.88 billion for the second quarter of fiscal 2014, compared to 3.30 billion for the second quarter of fiscal 2013.
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