Pandora Shares Plummet on Sour Fourth-Quarter Forecast
Pandora Shares Plummet on Sour Fourth-Quarter Forecast

Senate Passes JOBS Act Aimed At Helping Startups Raise Money
Entrepreneurs of all stripes, and certainly some in the media and entertainment field, are likely applauding a bill that helps them raise money.

The Jumpstart Our Business Startups (JOBS) Act passed Thursday by the U.S. Senate included an amendment that will open up new avenues of financing to young companies. An amended version of H.R. 3606 includes an amendment that will allow startups to legally raise money from non-accredited (read: small) investors. The House passed its version of the bill on March 8. The Senate's version tacked on amendments aimed at safeguarding investors.

The JOBS Act eases regulations on raising capital and disclosures made to the Securities and Exchange Commission. It removes SEC restrictions on crowdfunding that will allow companies to raise up to $1 million per year from small investors who may not be accredited with the SEC. The House version limits individual investments to $10,000 or 10% of annual income. The Senate version sets a limit at the greater of $2,000 or 5% of either annual income or net worth but raises the limit to $100,000 or 10% of income for people earning over $100,000 per year. The act also raises the threshold for mandatory registration to the SEC to 2,000 shareholders from 500 shareholders. There are also provisions to ease the disclosure regulations - passed in the wake of the Enron scandal - for relatively small and newer companies.

Are the provisions for crowdfunding a good or bad thing? They will certainly help startups seek capital from a larger pool of potential investors while reducing the associated regulatory burdens. The Consumer Electronics Association applauded the Senate's passage of the bill and claimed it will "support the drivers of the American economy -- entrepreneurs and innovators."

The JOBS Act does have its critics, however. Doubters don't want investor protections scaled back. Others wonder if individual investors, and especially those with relatively low net worth, should be allowed to put their money at risk in startups. While individual investors are allowed to buy stocks of publicly traded companies - just open an Etrade account - at least those are highly regulated companies with audited financial statements.

But the good could very well outweigh whatever bad comes from the bill. William Sahlman, a professor at Harvard Business School, asks us to imagine a world in which anyone is precluded from making an investment because they may lose their money. "That's a world in which FedEx, Apple, Intel, Genentech, and Facebook, just to name a few prominent American success stories, wouldn't exist," he writes. "Neither would Wal-Mart or IBM." ( New York Times)

Analysts Disagree On Pandora Valuation
BTIG Research analyst Rich Greenfield is sticking with his target price of $3.75 for Pandora as many other analysts have set their target prices well over $10. The problem is not that Pandora isn't a popular product, writes Greenfield, the problem is that Pandora's business model is flawed.

"Pandora's fundamental problem is that they are not offering enough ads per hour, given the mix shift to mobile audio CPMs. And, Pandora cannot even effectively sell all the inventory they have today. Yet, to drive profitability, Pandora needs to significantly increase ads units/hours. This will not only damage the consumer proposition of Pandora, but will add to the glut of inventory."

Pandora wants advertisers to think of it as a radio company, but it sells advertisements like a display ad-driven publisher. Greenfield calls Pandora a "poor advertising medium" for display advertising. But when Pandora shifts to audio advertising with "lower CPMs than their current multiplatform ad units," he writes.

Greenfield lays out numerous other reasons for his bearish outlook. He believes Pandora's competitors "are not giving up" and notes the rise of Clear Channel's iHeartRadio app at iTunes. (iHeartRadio was the #32 free iPhone app at iTunes Thursday afternoon, 12 spots below Pandora and 11 spots ahead of Spotify.) And he believes Facebook's coming IPO will cause the company to launch a mobile advertising strategy that will "dilute the CPMs Pandora is currently achieving."

Why is there so much distance between Greenfield and other analysts? Stifel Nicolaus analyst Jordan Rohan raised his price target to $18 earlier this month. JP Morgan has a price target of $17 and Needham is at $13, according to a post at SeekingAlpha.

While other analysts appear to focus on growth of listener hours and Pandora's disruptive business model - analysts just love a new company that disrupts the status quo - Greenfield is digging deeper that most into how consumers interact with the service and how it will generate revenue in the future. His valuation of Pandora is filled with assumptions other analysts just aren't making right now. It would be great to fast forward a year or two to see if the issues Greenfield has outlined have actually taken root. But we'll just have to wait and assess the company's progress quarter by quarter. ( BTIGResearch.com, via RBR.com)

Will MOG Be Rebranded As Beats?
What will become of the MOG brand and how might the music service be incorporated into HTC/Beats Audio phones? Here's an educated guess from Lucas Gonze, former product manager at Mog and current chief technology officer at Official.fm.

"My guess is that the MOG brand will be abandoned in favor of the Beats brand. MOG's software, like the in-browser app and mobile apps, will continue to exist, but will be named 'Beats.' When you get an Android phone with "Beats", that will mean it comes with a subscription to MOG. You'll be able to add a subscription to Spotify or whatever other service interests you, but you'll have already paid for the MOG subscription as part of the purchase price of your device. That means phone prices going up to cover the subscription. Where will the money come from? The subsidy paid by your telecom. The cost is about $10 a month. I suppose that will be added right on top of your phone bill." ( Gonze.com)

TicketWeb Signs New Deals
TicketWeb announced new contracts with ten clubs and new contracts with four existing clients. Among the new clients are Paxahau Event Productions and Management, producers of the Movement Electronic Music Festival, and the four Knitting Factory locations in Brooklyn, Boise, Spokane and Reno. Existing clients reupping with TicketWeb include the Mercy Lounge and Cannery Ballroom in Nashville and Joe's on Weed St. in Chicago. ( TicketWeb press release, via @NathanCHubbard)