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Pandora Said to Seek Money, New Terms From Record Labels

Updated on
  • Streaming-music provider said to seek better deal terms
  • Company has postponed proxy filings amid hunt for help

Pandora Media Inc., the embattled music streaming company, has asked major record labels for money or better deal terms to help reverse losses and reduce pressure from impatient shareholders, according to people familiar with the matter.

Top executives at Pandora have reached out with a couple of proposals for their counterparts at the record labels, which sell Pandora the rights to vast catalogs of music, said the people, who asked not to be identified discussing private information. In addition to asking for direct investments from the labels, Pandora has sought to renegotiate licensing deals to reduce its costs, they said. The labels are unlikely to accede to the requests, the people said.

Pandora isn’t about to run out of money. It generates a significant amount of cash thanks to its online radio service, which has 81 million customers. Yet Pandora is under a tremendous amount of pressure to prove to shareholders, in particular activist investor Corvex Management, that better days are ahead. Pandora declined to comment, and Corvex didn’t immediately respond to a request for comment outside normal business hours.

Pandora has been losing users and suffering from a slowdown in advertising growth as paid services from Spotify and Apple, as well as free options like YouTube, have siphoned away customers.

Pandora shares fell as much as 4.8 percent to $11.41. The stock, which is down from an October peak of $14.77, was still up 35 percent from a year earlier as of Thursday’s close.

The company is introducing Pandora Premium, a new on-demand service it hopes will stem further customer defections, and convert million of users of its free offering into paying subscribers.

The company lost $345 million last year, more than double its losses from the year before. Pandora had to pay for the music rights it needed to offer an on-demand service, and then spent additional money to develop the technology for that service and market it.

Pandora has been pushing for help from its main partners while simultaneously postponing the deadline for proxy filings, which shareholders could use to propose changes to the company’s board. Corvex, Pandora’s second largest shareholder, has been agitating for change, including a possible sale, and could seek more sway on the board if it feels it’s not being heard. Two directors will be up for re-election at the company’s next shareholder meeting -- Chief Executive Officer Tim Westergren and Tony Vinciquerra, a media executive to Corvex’s liking.

Pandora has been providing Corvex updates on the progress of its streaming services through non-disclosure agreements, people familiar with the matter said last month. Matrix Capital Management, Pandora’s largest shareholder, is growing restless as well, according to another person familiar with the matter. Matrix didn’t immediately respond to a request for comment after normal business hours Thursday.

Satellite radio company Sirius XM Holdings Inc. and its majority owner, Liberty Media Corp., have expressed interest in acquiring Pandora. Yet Sirius and Liberty, controlled by billionaire John Malone, haven’t offered a price satisfactory to Pandora’s board. Sirius and Liberty didn’t immediately reply to requests for comment.

With Liberty as the only likely buyer, Pandora’s stock price has risen and fallen with every stray remark by Liberty executives, who have said at times that Pandora is an attractive asset and at others that the company is overvalued.

— With assistance by Beth Jinks

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