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Pandora still hasn't named CEO as losses widen

Pandora still hasn't named CEO as losses widen


Board member Barry McCarthy leaves as company faces increasing competition and tough political battle

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Pandora, the web's top radio service, reported that the company's losses widened in its fiscal first quarter amid increasing competition and as the company prepares for another bruising fight on Capitol Hill. In addition, Pandora still hasn't named a new leader two months after CEO Joe Kennedy announced he planned to step down as soon as a replacement could be found.

Whoever Pandora may be considering as Kennedy's successor, it's clear leadership thinks it can find someone better than Barry McCarthy, one of the company's board members who was instrumental in helping to turn Netflix into one of the web's top entertainment sites. Tucked into documents Pandora filed with the Securities and Exchange Commission on April 8th, the company said that McCarthy, who was Netflix's longtime CFO and a Pandora board member for two years, is leaving. Pandora said that McCarthy decided not to stand for re-election when his term expires on June 5. The company did not give a reason for McCarthy's departure and a Pandora spokeswoman declined to comment but he sounds like someone who might have been a natural in the CEO's job.

"People keep saying that Pandora is the top web radio service. But YouTube is really the largest." Pandora is one of the leaders in the music industry's shift to streaming services. Instead of offering users the chance to buy and own individual songs, which they must store themselves, Pandora and Spotify offer to stream songs from their servers to PCs and other web-connected devices. But while the popularity of these new services grows, it is still unclear whether they will be profitable. Pandora said today that its losses widened from last year: the company reported a $28.6 million loss compared to the $20.2 million loss it recorded during the same period a year ago. On an adjusted basis, Pandora's loss was equal to 10 cents per share, which was in line with analyst expectations. The good news is that the $125 million in sales during the quarter was a 55 percent improvement from last year. Kennedy's replacement, whoever it is, will inherit a mixed bag

Kennedy's replacement, whoever it is, will inherit a mixed bag. Pandora has a large audience of more than 70 million active users. At the moment, investors appear to be warming up to the stock. Pandora's shares were trading at more than $16 in early morning trading, more than twice the $7.08 the stock sank to in November; but only just above the company's June 2011 IPO price. Pandora is also off to a big head start among internet music services to get into cars. Pandora already has deals with BMW, Ford Motor and General Motors. The size of the overall market represents a big opportunity for Pandora as well. Traditional radio advertising is worth $17 billion.

But the company also faces some big threats, not the least of which is iRadio. Apple, the largest music retailer, is readying a service that music industry sources say is a Pandora-like radio service with some significant features that outdo Pandora. Apple's iRadio, the unofficial name, will play songs randomly just like Pandora but iRadio will supply users with some on-demand features, such as fast forward and rewind, according to music industry sources. Google is also pushing into Pandora's space. The search giant last week launched All Access, a radio service that offers users the ability to listen to any song from its library whenever they want.

That's not all: Google is expected to launch a YouTube music subscription service sometime this year. One executive from a top record label said that this is what Pandora should really be worried about. "People keep saying that Pandora is the top web radio service," the exec said. "But YouTube is really the largest." Music videos are some of the most popular fare with YouTube's 800 million unique monthly visitors and The New York Times reported that YouTube is trying to license an audio-only feature from the top labels. Pandora also faces some big threats, not the least of which is Apple

To help lower its overhead, Pandora is lobbying Congress to reduce the statutory rate that webcasters pay for songs. The company made a run at that goal last year with the so-called Internet Radio Fairness Act, but the bill found little support on Capitol Hill; another attempt is being readied for this year. Pandora recently made an appeal to musicians to support its effort and groups representing artists immediately attacked it, illustrating the fact that Pandora is at war with its own suppliers.