(Reuters) - Online radio service Pandora Media Inc (P.N) said it would reduce its U.S.-based workforce by about 7 percent as it seeks to become profitable in the fiercely competitive market for music streaming.
The company also announced that it expects to surpass its previous fourth-quarter revenue forecast, propelled by gains in advertising revenue and paid subscribers. Shares of Pandora were up 6.8 percent at $12.81 in extended trading.
Pandora and its chief rival, Spotify, have struggled to find a sound business model amid razor-thin margins in the music industry. Hurt by competition from new entrants such as Apple and Amazon that can afford to lose money on music, Pandora’s revenue growth has been losing steam for several quarters, while its losses have deepened. Shares of Pandora, which is expected to report its fourth-quarter results on Feb 17, are down almost 70 percent from their all-time high in March 2014.
Pandora said the job cuts, which would be executed by the end of the first quarter in 2017 and do not include recent acquisition Ticketfly, are intended to reduce operational costs. As of Dec. 31, 2015, Pandora had 2,219 employees.
The company said revenue would exceed its previous forecast of $362 million to $374 million. Subscription radio service Pandora Plus, launched last fall, had attracted more than 375,000 new subscribers by the end of December, Pandora said.
Pandora Chief Executive Tim Westergren, who returned to the company last year, said in an interview last week that the company’s strategy is beginning to come into place.
The company has integrated its acquisition of Ticketfly, opening up a new stream of revenue, and it is putting the finishing touches on an on-demand music streaming service, which has long been missing from its lineup.
A top priority has been mending Pandora’s relationship with the recording industry, which grew strained through years of fights over music rights, Westergren said.
“Part of the cloud we had to come out from under was those years of essentially talking with the industry only in Washington,” he told Reuters. “That’s just not a place where healthy relationships are formed.”
Music executives now appreciates that a robust Pandora is good for the health of the industry at large, said Jason Peterson, director of Cinq Music, a music label.
“We should be doing everything we can to support the market development that these retailers do,” he said.
Reporting by Julia Love in San Francisco and Aishwaryavenugopal in Bengaluru; Additional reporting by Noel Randewich in San Francisco; Editing by Bernard Orr