Pandora’s Active User Base Grew 8 Percent in Latest Quarter

Pandora’s number of active users grew 8 percent in Q1 over the year-ago quarter to 75.3 million, while listener hours grew at a 12 percent rate to 4.8 billion, said CEO Brian McAndrews on an earnings call Thursday. McAndrews cited platform upgrades including alarm clock, sleep timer and station recommendations. Android app users are listening to Pandora significantly more than before the features were available, he said.

Listener hours also rose on availability of the service in more vehicles and CE devices, McAndrews said. Pandora is now available on the top-10 selling passenger vehicles, with five million unique Pandora customers using native automotive integrations, he said. The number of in-car users is likely higher, but there’s no way to measure the number of Pandora users who listen to the service via smartphone in the car, he said during Q&A.

During the quarter, subscription revenue rose to $53.7 million from $18.4 million, according to an 8-K filed with the SEC. Advertising revenue jumped to $140.6 million from $96.7 million in the 2013 quarter, it said. Chief Financial Officer Mike Herring told investors last spring “there’s a much, much bigger market opportunity in the free side” where far more people are willing to listen to ads in exchange for free music (CED May 16 p8).

On the company’s pricing change announced last month, Herring said the premium Pandora One service has held the same $36 annual fee since its debut in 2009, and the company added a $3.99 per month option later on. In March, Pandora eliminated the annual plan and added a buck to the monthly subscription price, with current monthly subscribers “grandfathered” in at $3.99 per month “for the foreseeable future,” he said.

On the lawsuit filed in New York State Supreme Court in Manhattan last week against Pandora on charges of unlawful use of pre-1972 recordings that aren’t covered under federal copyright law, McAndrews said he’s limited in what he can say about the suit, but thinks the “significant value” Pandora brings to artists is “beyond just royalties.” He cited access to more than 75 million monthly active users and exposure to a large breadth of catalogs “that go largely unheard” on terrestrial radio. In many cases that exposure helps “extend the longevity of an artist’s career,” he said.

McAndrews called the landscape of content licensing “a complex topic.” He cited recent rulings that were favorable to the company, including a court judgment last fall upholding the company’s right to perform all compositions in the ASCAP catalog.

For the quarter, Pandora revenue grew to $194 million from $115 million in the year-ago quarter, and its loss narrowed to $28.9 million from $38.6 million in Q1 2013. However, its shares plunged 16.6 percent Friday to $23.51 on what analysts called declining faith among investors about Pandora’s growth story.