Pandora Media (fka P)

[THisKIRK]

Is Pandora's "Fairness Act" a last resort for survival?


Good morning and good afternoon to everyone on this board, just want to share my thoughts on Pandora ticker symbol P. Early today I learned that Pandora has submitted a bill last Friday asking congress to pass this “Internet Radio Fairness Act”

Link founded here:http://thenextweb.com/insider/2012/09/21/meet-internet-radio-fairness-act-law-will-massive-financial-boon-pandora/

Which sounds appealing to investors because say this act does pass; within next quarter we can see Pandora’s revenue increasing 46% roughly. That’s about $147-151 million USD in total sales comparing its 2012 3QT of $101.1 Million in Sales.
I see Pandora’s gain today just some fluffy for the investors to have hope for Pandora. Let’s look at the facts. There are more people on the internet listening to a type of online radio whether it’s AM/FM radio or a different version of online radio such as iHeart Radio or Spotify. IMO the reason why Sirius pays less royaltie fees to record labels about 4.6% VS Pandora’s 50% ish fees is because of one important idea. Record labels see Pandora and other online radio services as a “cash cow”. Record labels see Sirius as baby cash. Less people on that radio and customers have to pay for the service so there is a big disconnect there. Record labels are smart knowing that over time there will be less people using to the traditional radio, while moving into an online radio that can be customized to their liking without all the ads. More and more people will turn into online radio services and for record labels to place a high margin fee for those songs is a smart move on their end.

The main point of having a business is to make profit. If record labels increase the fees on Sirius or reduces it on Pandora where will they find newer ways to make profit? I highly doubt that congress will take sides on this “Internet Radio Fairness Act” bill because if they do take a side most likely they won’t get any votes from the record labels or its artists any any donation anytime soon. From the point of view of Congress, its more important to stay in office than to help a an online service increase profit.

Pandora’s business model is simple. They sell ads on their mobile app or website and introduce new music to listeners by what they listen to. Year after year Pandora has been increasing members daily and as more members join the “Free” service I can see the Fees piling higher and higher. Despite Pandora’s $3.99 a month subscription it wouldn’t cover the amount of new members daily. Keep in mind that every song that is played, Pandora has to pay the record label regardless if they buy a song or not. Most people just tune into Pandora just to pass time and not worry about buying a new song or getting a new app from Pandora’s ads. IMO I see a sell off before today’s closing bell.

Like always Happy Trading.