Pandora, the popular music streaming service has successfully navigated the choppy waters of floatation, going public – and raising a whopping $235 million in the process. That is an awful lot of money for a company that hasn’t made a dime yet.
The public valuation puts the company at a total of $2.6 billion – which is even more money – and that’s twice as much as the company hoped for when it announced its plans back in February. Consider the planned rise in royalty costs, the fact that again the company haven’t made any money, and that is some serious investor confidence. Pandora currently expends a total of 49% of its revenues in royalties, but these are set to increase year on year until 2015, as streaming services become ever more popular. Major labels like to make as much money as they possibly can at all times, and they seem to have cottoned on to the paradigm shift that’s awkwardly moving across the globe.
The main difference between Internet radio and its terrestrial based counterpart is that public radio has to only spend about 10% rather than the 49% Pandora currently pay. In spite of the fact that Pandora isn’t profitable, Kurt Hanson, Internet radio vet, says that it kind of is profitable already. He says that the fact Pandora only plays about 80 seconds of advertising per hour rather than the 10-15 minutes that terrestrial radio does is definitely in the former’s favour. With logic like that, who needs economics?