updated 06:20 pm EDT, Thu August 22, 2013
40-hour limit repealed for mobile, company cites 'surgical levers'
Streaming music service Pandora will be purging the 40-hour mobile listening cap, according to the company's Chief Financial Officer Mike Herring. Citing improvements in the advertising business, the company claims to be able to lift the limit with no impact on usage or costs to the company. The news came amidst a decent quarter, albeit with a warning on the annual earnings, with the company posting a quarterly revenue of $162 million. Earnings came in at $0.04 per share.
Herring noted that when Pandora "introduced the 40-hour mobile listening limit, we were confident that our scale -- over seven percent total radio listening and Pandora's number one ranking in most major markets -- would allow us to take this action without impacting our key monetization initiatives in driving the disruption of the radio advertising market and driving our mobile advertising leadership. As our results have shown, the continued strong growth in our advertising revenue allowed us to cover the increased royalty costs with dollars left over to invest back into the business."
"With these tools in hand, and insight into how they work, we are resetting our levers in September. Notably, Pandora plans to eliminate the blanket 40-hour-per-month limit on free mobile listening effective September 1," he announced. In the six months since the company first implemented the free mobile listening limitation, Herring said, "we have gained critical insights into our user population that has given us greater control of our business. Because of these insights, Pandora has implemented both other surgical levers to control content cost and new features that will allow for greater product usage. With these tools in place we are well-positioned to continue to both optimize the cost structure of the business and further monetization progress."
The quarterly earnings call wasn't all good news for the company, though. Pandora has reduced its estimates for the calendar year to between no profit and a $0.05 per share gain, versus a $0.05 minimum expected by analysts. "We're taking the increased margin that we're getting and reallocating to invest in future growth," Pandora Chief Executive Joe Kennedy said Thursday. "Everything says we're firing on all cylinders. We're still in the earliest days. We have to invest to make the most of a huge opportunity."