Pandora is a very popular online radio station and has been around for a while. The company does very well in terms of subscribers and has expanded their product across many mobile platforms. The problem is the company has made no profit. According to “Pandora: The money-losing music machine” by Dan Mitchell of CNN Money/ Fortune.com, the company had lost of $6.8 million in the most recent quarter and $3 million the quarter before that. Despite the continual losses, Pandora has filed an IPO and might debut in the market tomorrow.
The reason Pandora cannot make profit is they lose money every time the product is used. The article explains the problem as:
“The trouble is the music royalties Pandora has to pay to music labels every time it streams a song. Those rates are higher than the advertising revenue Pandora collects. Every transaction is a money-loser. In its IPO filing, the company says it will continue to lose money through ‘at least’ fiscal 2012. But there’s nothing to indicate what might change in that time to turn around its current losses.”
Although they have a wonderful product, Pandora is not making money. Users will keep Pandora alive as long as the company has money to stay operational. The best thing to do is to work on a solution to their profit problem. When they figure out the answer, they will become an attractive company for investors.
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