January 12, 2017 Last Updated 4:40 pm

Good news, bad news: Pandora says they’ll exceed Q4 revenue forecast, but will also layoff 7% of staff

With earnings time coming real soon, Pandora is the first of the digital media companies to give guidance, so expect more news about cutbacks in the next couple of weeks

The music streaming service Pandora today said it would beat its fourth quarter revenue forecast (yeah), but that it would also layoff 7 percent of its workforce (wot?). Pandora reports earnings on February 9, and these kinds of bad news announcements generally come before earnings so that management can say “see, we’ve already taken steps to improve earnings.”

Pandora is in a real squeeze. Apple, Amazon, Spotify, Google… there is simply no reason to subscribe to more than one of the major music streaming services. Sure, there are room for indy services that cost less and deliver music available nowhere else, but not major music services. (I subscribe to Spotify and am happy, but once subscribed to Beats, and even earlier once subscribed to Pandora.)

Tim Westergren, CEO of Pandora, does his best to put a happy face on the news, and the paragraph about layoffs is well down the press release. But the earnings report will tell the tale.

Here is Pandora’s good news, bad news announcement:

OAKLAND, Calif. – January 12, 2017 — Pandora announced today it expects to exceed previously announced Q4 2016 revenue and adjusted EBITDA guidance ranges1given strong advertising performance and has surpassed 4.3 million in paid subscription customers.

“During the fourth quarter, we accelerated our core advertising business, increased advertising RPM and saw strong improvements in adjusted EBITDA,” said Tim Westergren, CEO of Pandora. “Now, with all of the elements of our strategy in place, we are in the best position possible to expand our listener base, drive engagement and deliver significant value to all of our stakeholders.”

As a result of its direct deals with music labels and publishers, Pandora introduced Pandora Plus along with new features and functionality on its ad-supported tier to listeners at the end of the third quarter. By the end of December 2016, the product generated more than 375,000 net new subscribers.

“The initial response from both new and existing listeners to the enhancements on the service is extremely encouraging,” Westergren continues. “This excitement and engagement bodes well for the introduction of Pandora Premium later this quarter.”

Pandora is also undertaking operational efficiency measures to reduce overall operating costs in 2017. It plans to reduce its U.S. employee base (excluding Ticketfly) by approximately 7 percent by the end of Q1 2017. Additionally, the company is leveraging its analytics platform and ad insertion logic to drive additional revenue and realize leverage in content costs. Taken together, these measures are designed to ensure the company can execute on its core strategic initiatives without additional capital and enable further investments in product innovation to drive advertising revenue and subscription growth.

“2016 was a year of significant investment for Pandora. In 2017, we will manage the business toward full year adjusted EBITDA profitability,” said Westergren. “While making workforce reductions is always a difficult decision, the commitment to cost discipline will allow us to invest more heavily in product development and monetization and build on the foundations of our strategic investments.”

Fourth quarter and full year 2016 financial results will be shared and discussed on Thursday, February 9, 2017 via a conference call at 2:00 PM (PT) / 5:00 PM (ET).

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