Pandora reported better-than-expected financial results for the second quarter of 2017 last night, with revenues up 10% year-on-year to $376.8m.
That included 25% growth in subscription revenues to $68.9m, as Pandora ended the quarter with just under 4.9 million paying subscribers. However, the company’s active listeners fell from 78.1 million in Q2 2016 to 76 million in Q2 2017 – a drop of 2.7% year-on-year.
Pandora’s earnings call provided more colour on its strategic shift back towards its free, ad-supported business, albeit without abandoning its premium subscription tiers.
“During Q2, we adjusted on and off-platform marketing efforts to refocus on audience growth versus subscription promotion,” explained chief financial officer (and acting CEO) Naveen Chopra.
There were positive things to report about the on-demand element of Pandora’s subscription business. It ended Q2 with around 390,000 subscribers to its Premium tier (with the rest of the 4.9 million payers being on its lower Plus tier).
Chopra outlined Pandora’s strategy as now focusing on recruiting active users for its free tier, then mining its data to decide which subscription tier to try to upsell them to.
“To be clear, we continue to believe that a compelling on-demand product is critical to maintaining and growing our total audience. Without such capabilities, we would risk decline of our user base,” he stressed.
However, Chopra later clarified that there has been a shift in strategy. “That strategy is much more focused on building the broadest possible audience as opposed to a strategy that was focused on – or I should say relied very heavily on pure subscription growth as a way of driving the business forward,” he said.
“The view now is that we need to develop as big an audience as possible across multiple forms of the service, both the ad-supported and subscription.”
One more titbit from the earnings call: Pandora had 1.6 million active users on voice-controlled devices like Amazon’s Echo in Q2.
It’s a segment that’s growing fast (up 282% year-on-year for Pandora) but the figure is a reminder of how early we still are in the adoption curve for smart speakers. An exciting category of device, but one only used by 2.1% of Pandora’s active listeners at the moment.