Pandora Shares Take a Hit Following Q4 Loss, Cannibalization Fears

investment plan for 2016 to quickly expand, executives told analysts Thursday after regular U.S. markets closed. The next day, shares closed down 12 percent to $7.99. Content cost increases due to a Copyright Royalty Board rate-setting ruling (see 1512170063) last year will lead to a $160 million jump in content costs this year over 2015, said the company. Additional investments for 2016 include $120 million for marketing, $100 million for product development and $125 million to build “infrastructure for the future, including content licensing and reporting infrastructure,” it said. The Q4 loss was $19.4 million, reversing a year-ago quarterly profit of $12.3 million, though revenue rose about 37 percent to $336 million. Pandora expects to have its on-demand subscription offering in the market before the end of the year but it won’t generate “meaningful revenue” in 2016, said CEO Brian McAndrews on an earnings call. The timing assumes the company will have publishing deals in place with labels, he said. McAndrews wouldn’t comment on a report in the New York Times that Pandora is working with Morgan Stanley on a sale plan. Macquarie Capital has “long believed that its brand and large 81m user base could be attractive” to traditional media companies, Internet or technology giants or “anyone in the music space,” analyst Amy Yong wrote investors Friday.Despite what an analyst cited as a slowdown in growth of listener hours and active users, Pandora expect growth over the next five years from consumer electronics and vehicles, said McAndrews. Pandora’s market share for radio listening in the U.S. passed 10 percent during the year, but with just 2 percent penetration in vehicles -- “which represent nearly half of radio listening” -- the company sees “tremendous upside” as cars become more connected, McAndrews said.