Pandora: The Beat on Music Royalties

Since the internet service provider’s IPO in June 2011, Pandora Media Inc (NYSE:P)’s stock price has declined 10.5%.  The company allows listeners to create personalized stations to access unlimited free music and comedy delivered via computer, mobile, and other connected device platforms.  Revenues are primarily derived through video and display advertising, but the company also offers a paid subscription service to listeners.

Pandora Media Inc (NYSE:P)

On August 29, 2012, Pandora’s second quarterly earnings were announced, and they were impressive.  Pandora’s stock price rose over 13% on revenues improving 51% to $101.3 million.  The announcement pushed Pandora’s stock price up to $12.43, the highest price the stock has reached in the past five months.  Over 40 million Pandora shares traded hands on August 29th, that’s 11.3 times the average daily value.  There remains a high short interest in Pandora since various investors have doubts that the company has established a sustainable competitive advantage and a solid revenue model.    Over 28.88 million, or 17.4%, of Pandora’s shares outstanding are shorted, giving Pandora a 10.4 short interest ratio.

Insiders have sold 535,480 shares in the past three months, and sold 4.84 million shares in the last 12 months.  Crosslink Capital is the largest hedge fund holder of Pandora stock and owns 34.96 million shares, comprising of over 40% of the fund’s portfolio.  Crosslink’s portfolio also consists of various other technology companies including the online family history resource Ancestry.Com Inc (NASDAQ:ACOM), the tech giant Apple Inc. (NASDAQ:AAPL), and they are also the largest hedge fund holder of the social game service Zynga Inc (NASDAQ:ZNGA).

The boost in Pandora’s share price is not only attributable to the company’s earnings release; they also may be positioned to benefit from federal regulation.  Democratic New York representative Jerrold Nadler released a discussion draft of a bill August 20, 2012, that would increase compensation for music artists by putting cable, satellite and Internet radio on the same royalty-setting standard.

Music artists are paid by broadcasters when their song is played on digital radio services like satellite, cable and Internet radio.  Nadler believes that it is not fair to music artists that broadcasters do not have to pay a royalty fee to artists when they play their music on traditional broadcast radio stations.

First Act, Nadler’s draft bill, will put satellite and cable radio services on the same royalty standard as Internet radio, making cable and satellite radio stations pay higher royalty fees to music artists.  Nadler’s draft bill proposes a marketplace stand that accounts for today’s technological environment and treats artists and platforms fairly and equally.

First Act was not viewed with the same optimism from the National Association of Broadcasters (NAB), which represents radio and television broadcasters.  NAB strongly opposes the draft legislation, claiming it fails to recognize the unparalleled promotional value of local radio airplay, and it would kill jobs at America’s hometown radio stations.

Republican Utah representative, Jason Chaffetz, also has his attention on music royalties.  He is working on a bill that would put Internet radio services, such as Pandora, on the same royalty-setting standard as other digital radio services.  Pandora has backed Chaffetz’s bill, which aims to lower the royalty fees Internet radio stations pay and make them more level with the rates of other digital radio services pay.

The Nadler bill and the Chaffetz bill amount to the same means to a different end.  Nadler believes that in establishing a level playing field, performing artists should not be hurt in the process, instead a royalty standard parity for all parties and compensate creators fairly should be created. This could create a considerable advantage for Pandora going forward and give its shares some momentum.

blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

The Top 10 States With Fastest Internet Speeds

10 Best Places to Visit in USA in August

Top 10 Cities to Visit Before You Die

Top 10 Genetically Modified Food In the US

15 Highest Grossing Movies Opening Weekend

5 Best Poker Books For Beginners

10 Strategies Hedge Funds Use to Make Huge Returns

Top 10 Fast Food Franchises to Buy

10 Best Places to Visit in Canada

Best Summer Jobs for Teachers

10 Youngest Hedge Fund Billionaires

Top 10 One Hit Wonders of the 90s

Fastest Growing Cities In America

Top 10 U.S. Cities for Freelancers

Top 9 Most Popular Free iPhone Apps

Top 10 Least Expensive Private Business Schools in the US

Top 15 Most Expensive Countries in the World – 2014

Top Businesses to Invest In

Top 5 Things You Might Be Doing Wrong With Your Business

Top 5 Strategic Technology Trends in 2014

Top Rags to Riches Stories

Parenting Behavior That Promotes Future Leaders

Top 5 Mistakes Made by Small Businesses

Top 5 Most Common and Potentially Devastating Financial Blunders

Top 5 Highest Paying Jobs for Web Designers

Top 6 Most Respected Professions that Also Pay Well

Top 5 Pitfalls Investors Should Avoid

Top 6 Lawyers and Policy Makers Under 30

Top 6 New Year’s Resolutions for Entrepreneurs

Top 7 Locations to Check in on Facebook

Top 5 Mistakes made by Rookie eBay Sellers

Top 7 eBook Publishers in 2013

Top 6 Health Industry Trends in 2014

5 Lessons for Entrepreneurs from Seth Godin

Top 5 Success Tips from Jordan Belfort – the Wolf of Wall Street

Best Master’s in Finance Degree Programs

Top 6 Earning Celebrities Over 50

The most expensive sports to play

Top 7 Earning Celebrities Under 25

Best 7 Online Courses to Take: Free Finance MOOCs

Top 6 Bad Habits that Promote Failure

20 Most Valuable Soccer Teams in the World in 2013

12 Most Expensive Countries for Foreign Students

Top 30 Most Influential Women in the World

Top 20 Most Expensive New Year Eve Shows

Top 5 Best Vocational Careers

Top 10 Jobs for 2014 by Salary Gain (Predictions)

Top 5 Digital Trends for 2014

Top 6 Things You Can Do To Increase Your Productivity

Top 9 Trending Smartphones in 2013

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!