Pandora used to be the company the music industry loved to hate. An aggressive campaign to lower royalty payments and a now ex-CEO who cared more about money than music earned the ire of many. But just as that image is changing, Pandora is feeling new pressures.
When Tim Westergren took back his job as the CEO of Pandora, the music industry responded positively, quickly cutting deals that enabled the launch of its paid on-demand music service. And as more musicians and labels took advantage of Pandora AMP's free analytics and marketing tools, a new appreciation emerged of the music streamer's place in the digital music ecosystem.
But activist investors have come to view Pandora very differently. Corvex Management LP, which owns 8.8% of Pandora and may increase its stake to as high as 15%, is pressuring Pandora to either get profitable quickly or sell.
Corvex's worries stem from Pandora's recent flat user growth and listening hours. As Spotify and others have soared, Pandora actually shrunk slightly. Also aggravating Corvex, is a months long and very public dance with Liberty Media's Sirius XM, who would love to purchase Pandora; but only if the price is right.
Westergren is said to be opposed to selling, pinning his hopes on attracting paid subscribers to its new Premium streaming service along with income from Ticketfly, which Pandora purchased last year. To buy more time, Westergren may be forced to add Corvex representatives to the Pandora board.
“After all this talk of consolidation or a merger, it seems clear Pandora is trying to be a really strong standalone company,” said Amy Yong, an analyst with Macquarie Research who recommends buying Pandora stock told Bloomberg. “Much of that will hinge on their ability to do a subscription product and compete with Spotify.”