Pandora Media management recently highlighted their plans to not only expand internationally but also offer more listening formats than just internet radio. However, their plans are on hold as the Copyright Royalty Board (CRB) sets the licensing rates for the years 2016 through 2020.
The ruling from the CRB will have major bearing on what Pandora ends up doing, so investors are naturally wary due to concerns about content costs, which could stay nearly the same or climb much higher. If the CRB raises the rates significantly, Pandora’s bottom line will be severely impacted.
Pandora Media has a strong case
In a report dated March 23, Canaccord Genuity analysts Michael Graham and Austin Moldow said Pandora made a rebuttal to the CRB recently and that the rebuttal is consistent and sets for a strong case for why the rates shouldn’t change much. The streaming radio service provider said its deal with Merlin, which set rates a bit lower, is the best benchmark in terms of setting rates across the music industry. The Canaccord Genuity team thinks the company’s case “aligns most closely with the legal questions at hand.”
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Sound Exchange also gave a rebuttal to the CRB—to the tune of 627 pages, which then exploded into 1,358 pages. The analysts said while at first, Sound Exchange was keeping its strategy under wraps, the rebuttal “more fully reveals [its] hand.”
They think the firm’s rebuttal emphasizes lumping Pandora and other non-interactive radio streamers in with Spotify and other interactive streaming services. Sound Exchange also revealed the deal for iTunes Radio, which they think was offered as a bit of a “calculated move” at the time so that Pandora wasn’t prepared for it.