News - 21/04/2015

Pandora replaces two board members as Morgan Stanley outlines worst case scenario

Pandora replaces two board members as Morgan Stanley outlines worst case scenario

2015 is proving to be a particularly significant year for Pandora. User growth is slowing down and future profitability depends on the rulings of a number of government-controlled bodies, including the Copyright Royalty Board. 

So it is significant that the company decided to replace two board members with music industry veterans Timothy J. Leiweke and Roger Faxon. 

Leiweke’s resume includes being the CEO  of A.E.G and more recently the CEO of Maple Leaf Sports and Entertainment in Toronto. Faxon is best known for being at the helm of EMI Records up until the label was purchased by Universal Music Group and Sony, he has since been running his own company A&R investments.

Brian McAndrews, chairman and CEO of Pandora, stated: "I could not be more excited for Roger and Tim to join the board. Both are forward-thinking and bring invaluable expertise to help Pandora play a leading role in the evolution of the music industry, Roger’s deep knowledge of the music business and Tim’s experience in entertainment will provide unique insights as we continue to deliver music our listeners love and new tools to help music makers thrive.”

The two appointments are part of an ongoing effort by Pandora to mend fences with the music industry after a few turbulent years. 

It looks increasingly likely that publishers will be allowed to carve out their digital rights from the agreements they have with organisations like BMI and ASCAP, which means that Pandora would have to negotiate a number of separate deals in order to be able to offer the comprehensive catalogue it offers today. 

In the meantime, a Morgan Stanley analyst highlighted that in the worse case scenario the ruling of the Copyright Royalty Board could prove to be a disaster for Pandora’s profitability and share price, since it could lead the company to require another $350m in funding over the next three years and it could drive the share price to $2 or $3 per share - as opposed to the current share price that is above $17. This is a bear scenario that is overall not that likely but is sure to dampen the enthusiasm of more careful investors. 

Pandora is also expected to expand internationally, although that may require a significant investment and could cause further rights-related headaches. 

 

(Andrea Leonelli)

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