Pandora Grew Like Gangbusters in Q1 -- Except In One Important Way
-- Pandora is growing quickly and people are listening longer. Yet as more people listened more often over the last 12 months, Pandora was able to generate little additional revenue for each hour of listening.
The company's updated S-1 filing, related to its planned IPO, shows remarkable growth. Registered users were 94 million at the end of the quarter (ended April 30), up 15% from the previous quarter and up 77% from the prior-year quarter. Active users at the end of April were 29 million, up 17% from the previous quarter and up 89% growth from the prior-year quarter. (Pandora defines an active user as "the number of distinct registered users that have requested audio from our servers within the trailing 30 days to the end of the final calendar month of the period.")
Revenue in the quarter was $51 million, up 136% from $21.6 million in the prior year quarter. At that pace, the company will easily surpass the $137.8 million of revenue for the year ended January 31.
Listening hours grew in both absolute and per-user terms. Listener hours grew 129% to 1.6 billion in the last quarter, up from 700 million in the first quarter of 2010. Growth in listener hours outpaced growth in both registered users (77%) and active users (89%). Hours per registered user grew 29% and hours per active user grew 21% -- both are further indications that Pandora users are spending more time.
But while Pandora's audience and listening hours soared, the company barely improved how well it monetized that listening. In the last quarter, revenue per listener hour rose just 3% compared to the prior-year quarter. Revenue grew 136% to $51 million from $21.6 million in the prior-year period. Recall that listener hours increased 129%.
In other words, Pandora did not become much more efficient in generating advertising or subscription revenue. Revenue per registered user and revenue per active user both rose quite a bit over the last year -- 33% and 25%, respectively. But again, that additional revenue came with a corresponding increase in hours listened. There was barely any improvement in how well listening hours were monetized.
That should sound at least small warning bells. Due to its agreement webcasters made with SoundExchange, Pandora's royalty for each non-subscription play will increase from $0.00102 in 2011 to $0.0011, $0.0012, $0.0013 and $0.00140 in the next four years. That's an annual increase of roughly 8% and an increase over four years of 37%. The per-stream royalty for subscription plays will increase 47% over that time span.
But those warning bells are small and faint for a reason. Pandora was able to raise its revenue per listening hour 41% from 2009 to 2011. As the advertising market rebounds and the company improves its in-house capabilities, revenue per listening hour is likely to increase further.
One thing that didn't change over the last 12 months is how the listening is monetized. Advertising represented 85.5% of revenue, basically the same as the 85.4% of revenue in the prior-year quarter. Subscription revenue and "other" accounted for the remaining 14.5%.
Sean Parker Further Boosts Stofity's U.S. Launch Hype
-- Rarely has a company without U.S. operations generated so much attention in the United States. But that's the case with (justifiably) hyped music service Spotify.
The latest news item is related to comments made this week by Sean Parker, a tech entrepreneur who has invested in Spotify. Parker had said he hoped Spotify would launch in the U.S. this summer. But Spotify said there's no timetable.
"As an investor in Spotify, Sean [Parker] is entitled to his opinion. However, he is not a spokesperson and does not have an operational role in the company," a Spotify spokesperson told Dow Jones Newswire. The only timeline Spotify would give was "as soon as possible."
Vevo Takes Second on ComScore's April U.S. Rankings
-- Music video service Vevo took second on comScore's U.S. online video rankings for April. Vevo had 55.1 million total unique viewers, 309 million viewing sessions and 99.2 minutes per viewer. Google sites topped the list with 142.7 million total unique viewers, 1.97 billion viewing sessions and 286 minutes per viewer. Yahoo sites ranked third, Facebook was fourth and Microsoft sites were fifth.
Guardian/Observer Rank U.K. Music Industry Players
-- In the U.K., the Guardian and the Observer have teamed up to create a list of the 100 most powerful people in the U.K. music industry. The team behind British singer Adele is No. 1, Universal Music Group's Lucian Grange and David Joseph are No. 2, and Simon Cowell is No. 3.
Oddly, the three founders of YouTube are ranked at No. 6, two spots ahead of the two founders and executive chairman of Google (which acquired YouTube years ago and is far more powerful as a whole entity). After Adele, the next two artists were will.I.am at No. 11 and Lady Gaga at No. 18.
One has to wonder if Gaga would have ranked higher if the list had been compiled after "Born This Way" sales numbers are announced next week.