It’s just over a year since Pandora laid off 7% of its staff in the US in order to “to focus and realign existing resources on execution and make further investments in product innovation to drive advertising revenue and subscription growth”. Now it’s in for another round of layoffs, this time “an organisational restructuring designed to prioritise its strategic growth initiatives and optimise overall business performance”.
That translates to a 5% reduction in Pandora’s workforce. Based on the 2,488 employees it had at the end of 2016 before the first round of cuts (which could have been around 175 staff) this new round of layoffs could be as much as 115 people, depending on hiring policies later in 2017 – the company is due to publish its full-year financials on 21 February, which is when we’ll get up-to-date numbers.
What’s going on here? Pandora said last night that the reorganisation “shifts resources to focus on ad-tech and audience development efforts while positioning the company for improved operating leverage over time” – while also saving around $45m a year. “We have an aggressive plan in place that includes strategic investments in our priorities: ad-tech, product, content, partnerships and marketing. I am confident these changes will enable us to drive revenue and listener growth,” said CEO Roger Lynch.
For now, Pandora’s on-demand subscription tier continues, but as we’ve reported before, the company clearly sees more growth potential in unlocking more revenues from its free ad-supported tier – despite the recent trend of declining active-listeners. Last year’s $480m investment from satellite-radio firm Sirius XM has not staved off the reduction in headcount though.
Talking of Sirius XM, that company announced its latest financial results last night, including the admission that it has recorded a decrease of around $72m in the fair value of its investment in Pandora – although this follows gains in the previous quarter. “We do not currently expect the value of our preferred stock investment in Pandora will fall below the accreted value of that investment,” CFO David Frear soothed analysts in Sirius XM’s earnings call.
Pandora is rebooting, then, but its new investor continues to perform well. Sirius XM posted revenues of $1.4bn in the final quarter of 2017, up from $1.3bn a year before, although its $37m net loss was a reflection of a $185m tax-related charge. Sirius XM ended 2017 with 27.5 million ‘self-pay’ subscribers to its service. With three of its executives now on Pandora’s board, the company’s task in 2018 will be to help the personal-radio service reignite its own growth in users and ad revenues.