Pandora acquisition bid revealed as Q2 losses leap

While internet radio company Pandora Media reported a spectacular increase in losses in Q2 overnight, it came to light that US media, communications and entertainment Liberty Media Corp has made an informal offer for the company. 

The Wall Street Journal reported last night that Liberty Media Corp CEO Greg Maffei’s proposal valued the Oakland, California-based company at more than US$3.4 billion (A$4.5 billion). The bid was made some months back, the WSJ said. 

Liberty Media Corporation’s interests in stakes in Live Nation and satellite radio service Sirius XM Holdings, Inc. as well as ownership of the Atlanta Braves major league Baseball club and stadiums. 

However the Pandora board had rejected the $15 per share offer as it believed that the company’s true value was closer to $20, as it was trading late last year. 

The WSJ also said that Pandora has also investigated interest from Apple and Amazon. In May, hedge fund Corvex Management LP bought a 9.9% share in the 16-year old radio company, and urged it to scout buyers. 

But overnight, its posting of Q2 financials, showed that while revenue was up year-at-year at $343 million ($456.9 million), its losses grew spectacularly. They jumped from $16.2 million ($21.5 million) in Q2 2015 to $71.8 million ($95.6 million) this quarter. Pandora attributed this to a number of factors. The ad market was soft. Sales and marketing costs were up to $29.8 million ($39.7 million). Interest expenses were up from $124,000 ($165.1 million) to $6.2 million ($8.2 million), and "other" losses went from $256,000 ($341,000) in the black to $5.9 million ($7.8 million) in the red.  

Royalties to the music industry were $176.6 million ($235.2 million) in this quarter (or 51% of total revenue), adding to the $2 billion ($2.66 billion) it has already paid to the recording industry, Pandora CEO Tim Westergren stressed. 

In February, Pandora unveiled a costly, five-year plan to quadruple annual sales to $4 billion ($5.3 billion) by 2020. 

Pandora’s revenue comes from a number of avenues. These include advertising on its personalised internet radio service, ad-free subscriptions, and selling concert tickets through its Ticketfly subsidiary. 

It is also planning to launch an on-demand service like Spotify and Apple Music, following its buy-out of the now-defunct streaming service Rdio after it declared bankruptcy. Westergren said plans for the new service are on course. Pandora is having "very productive negotiations with the three major labels" as well as a range of indies. 

"Pandora plans to deliver a powerfully differentiated music experience to accelerate growth and deliver value to listeners, music makers, advertisers and ultimately shareholders," Westergren declared.