Watch Pandora's Royalty PaymentsAlong similar lines, consider Pandora ( P). Of all of the things that could move this stock higher, the situation surrounding music royalty payments deserves greatest attention. Certainly, an earnings beat next month would catalyze Pandora as it would Zynga. But thinking long-term, a new and more favorable royalty structure matters more. Ever since Pandora went public, the high cost it pays to stream songs dominates the bear case. And there's no question, Pandora commits way too much revenue to content acquisition. The company knows this. It continues to actively work to improve the situation.
- Pandora Co-Founder and Chief Strategy Officer Tim Westergren testifies in front of a Congressional committee asking for a more equitable royalty payment system.
- Pandora reenters New Zealand and Australia. It would not have made the move without a fair deal on royalties (e.g., less than 25% of revenues). Could this be a harbinger for more international deals or a framework for future domestic arrangements?
- The Hill reported last week that Republican Rep. Jason Chaffetz of Utah is drafting legislation that would level the royalty playing field because, as Chaffetz put it: "It seems screwy that royalty rates change so dramatically based on the platform."