What Are Pandora’s Key Sources of Revenue?

P: Pandora Media logo
Pandora Media

Pandora’s (NASDAQ: P) revenue has gradually increased over the years, primarily due to growth in ad revenues, as well as its subscriber base and revenue per subscriber. Pandora recently reported better-than-expected growth in its subscribers for 2017, growing 25% year-on-year to 5.48 million.

Advertising revenue accounts for nearly 73% of the company’s overall revenues. Ad revenues were $1.07 billion (flat y-o-y) in 2017, primarily due to soft performances in total listener hours and the number of active listeners. Total listener hours decreased by 6.5% y-o-y to 5.03 billion, while the number of active listeners decreased by 6% y-o-y to 74.7 million.

Subscriber revenue accounts for nearly 22% of the company’s overall revenues. These revenues rose to $316 million (+ 40% y-o-y) in 2017, primarily driven by an increase in the number of subscribers and revenue per subscriber. Paying subscribers grew 25% y-o-y to 5.48 million. The better-than-expected results were primarily due to a 145% y-o-y surge in listening via smart speakers as well as numerous device partnerships   with the likes of Comcast, Amazon Fire TV, Sonos, and Android TV. For 2018, Pandora remains optimistic about further expanding its subscriber base driven by including podcast services, growth in the wireless audio market, more device partnerships, and increased music consumption. Looking at 2018, we estimate the company’s Subscriber revenue to grow by around 50% and forecast a loss of over 30 cents per share.

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We have created an interactive dashboard that shows Pandora’ key revenue sources and the expected 2018 performance. You can adjust the revenues and multiple to see the impact on earnings.

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