Pandora’s listener hours dropped to 1.25 billion in June from 1.35 billion in May, according to figures the company released Tuesday. A decline in listening doesn't happen often, but it doesn't necessarily signal problems for either Pandora or Internet radio in general.
A Pandora spokesperson explained to Billboard the decline in listener hours in June was the result of the cap on mobile listening hours as well as seasonal fluctuation. A look at Pandora's monthly listener statistics show these two factors, and not other external forces that could merit worry about the state of Internet radio, are the likely causes for the decline.
Listener hours also dropped in April, to 1.31 billion from 1.49 billion in March, but that was the result of monthly listening caps placed on mobile use. Those caps have dampened listener hours in recent months. Pandora averaged 1.3 billion listening hours per month in the three months since the caps were implemented compared to an average of 1.42 billion hours in the preceding three-month period.
The caps were implemented to reduce Pandora's royalties as a percent of revenue. The company generates more money from desktop streams than mobile streams and pays a royalty regardless of where the stream originated. Thus, a stream from a mobile device is effectively worth less than a stream from a desktop. The caps ease the royalty burden by cutting off the most active mobile listeners or pushing them to either desktop listening or a paid subscription.
Previous years have also had a seasonal dip at the beginning of summer. In June of 2012, listener hours fell to 1.08 billion from 1.1 billion the month before. In June of 2011, when Pandora's month-to-month growth in percentage terms was larger than it is today, listener hours grew 2.2% (compared to 4.6% and 5.3% in the months preceding and following, respectively).
But listeners keep flocking to the service. Pandora has continued to add regular listeners as overall listening has dropped. Monthly active listeners in June rose slightly to 71.1 million from 70.9 million in May and also increased, to 70.1 million from 69.5 million, after the listening caps were implemented.
Overall, a decline in June is not a cause for concern. Padora's numbers show there is great interest in Internet radio. The upcoming launch of Apple's iTunes Radio should add more interest to the market.
Although Pandora shares have risen sharply in 2013 -- up 114% year-to-date -- investors have reacted negatively to these small drops in listener hours. Its shares were down about 5% in early trading Tuesday but regained around one percentage point by mid-afternoon. Shares fell the same amount in May after the company announced its April listener metrics.