Pandora Media, grappling with rising music costs, expects the royalties it pays to artists like Justin Timberlake, and record labels to decline to 40 percent of revenue from about 60 percent now, Chief Financial Officer Mike Herring said.
The company, the biggest Internet radio provider, expects to reach that target over the next few years, Herring said yesterday at an investor conference sponsored by Roth Capital Partners in Dana Point, Calif.
The company is tackling royalty rates and seeking to boost the revenue it gets from advertising. With targeted ads and interactive features, Pandora is able to levy a premium over radio spots, Herring said. The company is working to close the gap between its ad revenue, now at about 1 percent of the radio industry’s total, and its 8.5 percent listener share, he said.
Pandora shares fell 0.7 percent to $13.72 at the close in New York. The stock has climbed 49 percent this year.
Music costs amounted to 61 percent of the company’s $125.1 million in revenue during the quarter ended Jan. 31, compared with 59 percent a year earlier.