Pandora’s stock has been getting utterly destroyed the past week — crashing 30% after it reported quarterly earnings — and has continued to fall. It has been downas much as 45%from its high last year.
Though the $US85.9 million loss Pandora reported in the third quarter was roughly in line with many analyst estimates, its customer acquisition costs more than doubled, according to Fortune. This didn’t sit well with investors.
And one area it could be losing out to competitors like Spotify is in adding younger users.
“I think some other models like Spotify and others, there are some that have perpetual free alternatives, and that is going to attract some of the younger audience,” Pandora CEO Brian McAndrews said. “Whether that’s sustainable or not is a very different question.”
Pandora, of course, does offer its own perpetually free version. But McAndrews seems to view Spotify as fundamentally different in its business plan. He implies that Spotify is great at getting users simply because it is burning money in an unsustainable business model.
You can feel McAndrews’ annoyance that he is trying to claw public company Pandora’s model toward a profitable future, while Spotify grows bigger and bigger on what he suggests may be a house of cards.
This could just be the biased opinion of a CEO looking for someone to blame, but he does have a point regarding Spotify’s business model. As Spotify’s revenues have accelerated, so have its losses — and they show no signs of stopping. Of course, let’s not forget that Pandora posted a $US85.9 million loss this quarter.