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Pandora's (P) CEO Steps Down as Troubles Continue Unabated

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Pandora Media Inc’s CEO, Tim Westergren, has stepped down from his role and will no longer serve as a board member. CFO Naveen Chopra will serve as the CEO in the interim. Apart from Westergren, the company announced the departure of President, Mike Herring and CMO, Nick Bartle.

Westergren, who was reinstated as the CEO last year, signed off by saying “I am incredibly proud of the company we have built. We invented a whole new way of enjoying and discovering music and in doing so, forever changed the listening experience for millions.”

He further added “We rebuilt Pandora’s relationships with the music industry; launched a fantastic Premium on-demand service, and brought a host of tech innovations to our advertising business. With these in place, plus a strengthened balance sheet, I believe Pandora is perfectly poised for its next chapter.”

Meanwhile, the company has inducted Jason Hirschhorn to the company’s board. He serves as the CEO of a digital content startup, ReDEF Group.

Pandora’s Troubles

Seventeen years ago, Will Glaser, Jon Kraft and Tim Westergren founded a company called Savage Beast Technologies, which later came to be known as Pandora Media. Despite the fact that Pandora holds a prime position in the online radio market, the company has been struggling with profitability.

Rising costs related to licensing, expansion and higher operating expenses add to its woes. Pandora will reportedly be pulling out of Australia and New Zealand, its only two international markets as it battles rising costs.

Turnaround Initiatives

Since last year, Pandora has been taking strategic measures to post a turnaround. Last year, the company announced two new services – Pandora Plus and Pandora Premium. While Plus is a “one-of-a-kind, ad-free radio experience” available for $4.99 per month, Premium creates a playlist for users based on their playlist history, which, Westengren was quoted saying, is its “standout” factor. It will be ad free and will enable users to save songs for offline listening. Pandora Premium carries a price tag of $10. However, analysts have observed that the company’s new services don’t offer something radically different from what is already available in the market. 

As part of its strategy, Pandora also acquired companies like Next Big Sound and Rdio, along with cutting label deals to reduce dependence on CRB rates and better manage its content costs. Moreover, the company has struck licensing deals with Sony Music, Warner Brothers and Universal Music Group. Recently, to lower costs, Pandora announced a 7% cut in its workforce.

A few days back, Pandora received $480 million as investment from SiriusXM Holdings (SIRI - Free Report) . It has long been speculated that Sirius is interested in acquiring Pandora. The rumors may as well come true since the investment gives Sirius about 19% stake in the company as well as three board seats, including that of the chairman.

Sirius CEO, Jim Meyer said in a statement "This strategic investment in Pandora represents a unique opportunity for SiriusXM to create value for its stockholders by investing in the leader in the ad-supported digital radio business, a space where SiriusXM does not play today. Pandora's large user base and its ability to provide listeners with a personalized music experience are tremendous assets.”

Apart from that, Pandora has also announced that it will be selling Ticketfly to Eventbrite for $200 million. The transaction is likely to conclude in the third quarter of 2017. In Oct 2015, Pandora had acquired Ticketfly for $450 million.

Competition Woes

Though these initiatives appear to be headed in the right direction, analysts observe stiffening competition from the likes of Spotify, Tidal and Amazon (AMZN - Free Report) as an existential threat. Pandora’s entry has been pretty late in the on-demand music services arena, which boasts big names like Spotify and Apple Inc. (AAPL - Free Report) .

In fact, Apple Music has seen phenomenal growth. Within two year of its existence, Apple Music has reportedly amassed over 27 million paid subscribers, inching closer to Spotify’s 50 million. Apple Music’s collaborations with popular music artists like Taylor Swift and many more have been widely considered by analysts as the key to its success. 

Zacks Rank & Stock Price Movement

Currently, Pandora carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

We note that Pandora’s shares have declined 29.6% in the last year, vastly underperforming the Zacks categorized Internet Services industry, which gained 37.8%.

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