Report: Pandora Loses A Third Of Its Users In A Year

• 65 million Pandora accounts became inactive over the past 13 months.
• Both iTunesRadio and Spotify added more users than Pandora since March 2013.
• More Americans use YouTube to listen to music than Pandora.

A few days ago Pandora disclosed that it now has 250 million registered users. The company's management apparently did not realize how damaging this boastful announcement can be, according toAndrie Volgin at SeekingAlpha.

The most obvious - and a very disturbing for Pandora stockholders - comparison is that there are approximately 250 million people over 13 years of age in the United States. Where will the growth come from, if the number of registered accounts equals the number of all potential customers?

Volgin

According to Volgin, the only logical explanation for this conundrum is that many users have multiple accounts, and that the number of such duplicate accounts must be in the tens of millions.

This explanation, he opines, inevitably leads to an even more disturbing question: when Pandora reports its active monthly users, are they referring to real people or "registered accounts"? Pandora provides an answer to this question in its annual report:

The number of active users may overstate the number of unique individuals who actively use our service within a month as one individual may register for, and use, multiple accounts.

Volgin writes this means that fewer people use Pandora than the headline numbers in the company's monthly and quarterly reports suggest. Considering how many duplicate accounts there must be, the difference, most likely, is very significant. Note that this caveat is included in the annual report, but the company never mentioned it in its monthly audience reports or on quarterly conference calls, and he's never saw it in any of the media reports covering the company.

This is not the only conclusion, accoriding to Volgin. We can also use it to calculate the churn rate. A churn rate - the number of customers who drop the service and have to be replaced by new customers - is a very important metric for any company. Pandora does not disclose this information.

Read More Now