Pandora: all that's left is hope, but a lot of it

Pandora have just released their financial perfomance figures for 2013. Here's what they choose as the headlines:

- Fiscal 2013 revenue of $427.1 million grew 56% year-over-year; 4Q13 total revenue of $125.1 million grew 54% year-over-year
- 4Q13 total mobile revenue of $80.3 million grew 111% year-over-year, outpacing mobile listener hour growth, which grew 70% year-over year
- Fiscal 2013 total mobile revenue of $255.9 million more than doubled and grew 105%, outpacing mobile listener hour growth, which grew 89% year-over year

All that shouting about revenue can only mean one thing: they're not making profits.

Indeed, the losses are so grim, Pandora can only bring themselves to express them as losses-per-share:

For the fiscal year 2013, GAAP basic and diluted net loss per share were ($0.23). Non-GAAP basic and diluted net loss per share were ($0.08), excluding approximately $25.5 million in stock-based compensation. Basic and diluted earnings per share were based on 168.3 million weighted average shares outstanding.

You have to spend a couple of minutes carrying figures before you realise they're talking a great big hole. Even if you do exclude "stock based compensation".

For the next year, though, they're predicting a profit per share of something between 5cents and minus five cents, which is either going to be good news or terribly miserable.

The company is upbeat about things, though, pointing to buoyant listener hours and rising advertising take:

"For the past two quarters, growth in mobile advertising revenue exceeded growth in mobile listening hours,” as CFO Michael Herring put it.

That's one of those impressive sounding claims that suddenly falls apart when you think about it - there's no promise that the advertising revenue is growing at a rate large enough to cover the costs of delivering the growth in mobile listening hours; just that one percentage number is bigger than the other.

At the same time, Pandora's CEO Joeseph Kennedy is getting the hell out of Dodge.

The end result of all this was the share price of Pandora rose. How much that is down the general giddiness of the markets off the back of a Dow Jones record this week isn't clear.

We7 nearly makes a million

It's difficult to know exactly what the We7 financial results are telling us.

There's some good news: turnover trebled, to £965,374.

There's some bad news: losses were £2.97million.

There's some good news, in that the gap between spending and income has never been so small.

There's some disconcerting news, in that We7 must have known where they were before launching the not-universally-loved refocusing.

Although they're still running at a loss, there is some cash behind them:

We7 secured £3.6m in funding in May this year from investors, including Qualcomm Ventures and Pentech Ventures, with a further £2.1m to be paid in the final quarter of this year. It also won a government grant worth £1.8m for this year and 2012.

There's a lot of goodwill there, but it's now become a crazy game-show, trying to plug the losses before the cash runs out. Let's hope they make it.

HMV warn leaky boat might leak a bit more

Given that we've only completed two months of 2011 so far, it might seem surprising that MHV are already on their second profits warning already.

HMV told the city that its profits were going to be "moderately" below expectations - which seems right up there with "this might sting a little" and "I've some rather bad news". Stockholders seem to have seen this through Sergeant Wilson approach, and dumped HMV shares faster than you could put Olly Murs albums into a bargain bin.

The Guardian offer this handy graph of HMV share prices:

The company is still expecting to make £45million in profits this year, but set against that is £130m worth of debt. Shares value the company at around £66m at the moment, which the astute amongst you will spot is about half of the value of the debt it carries.

Nipper, the HMV dog, is looking up at Mr Herriot with meaningful, but tired, eyes.

[Thanks to Michael M]

Warners reports: Not brilliant figures

Warner Music Group is being talked about as a possible purchaser for EMI when Citi are done with it. But given their own struggles, would cutting the number of majors to three just be a shortcut to cutting them to two?

Digital Revenue Represented 37% of U.S. Recorded Music Revenue in the Quarter

That's good, right?

Not really, because the share is rising mainly because other sales are falling. It's all about the loss:

Net loss was $0.12 per diluted share compared to net loss of $0.11 per diluted share in the prior-year quarter. The Quarterly Severance Charges had a $0.07 per diluted share impact in the current quarter and a $0.03 per diluted share impact in the prior-year quarter.
[...]
Net loss was $18million

So, all a bit grim. But, hey, great times are just around the corner:

"While industry pressures and a highly competitive release schedule limited our results in the first quarter, we're confident that our disciplined A&R investments, successful revenue diversification and innovative digital strategies will drive WMG's long-term growth," said Edgar Bronfman, Jr., Warner Music Group's Chairman and CEO.

The 'first' quarter for Warners is, of course, the bit that includes Christmas. In other words, the bit where you should be making the money for the year. Let's hope their A&R is finding magic elves.

Warner Music suffers cold Christmas

It's meant to be the most wonderful time of the year, and with all those stockings just waiting to be stuffed with CDs, wanted or not, you'd have to be a massive bungler to lose money at a major label in the last quarter of the year.

Warners have managed it though, while managing to rake in nearly a billion dollars in revenue.

At Warners HQ, though, they're just impressed with how well they've done:

"As our stable margins show, we carefully manage our costs and regularly work to adjust our business in order to minimize the impact of a transitioning recorded music market," Steven Macri, Warner Music EVP and CFO, added. "Similar to last year, we expect our release schedule in fiscal year 2010 to be back-end weighted."

You lost seventeen million dollars, Macri. I don't want to go all Micawber on you, but if you're splashing out more than you're bringing in, you don't really have much in the way to boast about carefully managing your costs.

You put a billion dollars in your pocket, but ended up having to borrow the bus fare home. Were I a shareholder, I might not be going "these guys have stabilised margins at a point where we end up with less money than we started out with."

"We are pleased to have delivered stable revenue and OIBDA in our core Recorded Music and Music Publishing businesses despite ongoing recorded music industry pressures and macroeconomic headwinds," said Edgar Bronfman, Jr., WMG Chairman and CEO said in statement released with the SEC fiiling. "Our goals remain focused on delivering strong returns on A&R investments while we develop new business models, diversify our revenue mix and fortify our digital leadership position."

New business models, you say, Edgar? Yes, the idea of cutting albums into bits really will work, just like you can diet simply by taking smaller mouthfulls of cream cake.

The obvious, screaming question, is why Warners are pumping cash into A&R at all. They're not very good at it, it's costly, much of what they do loses money and it all hangs on a hope that sooner or later they'll find an artist who will make ten albums which sell more than a million or so.

Even if they did, as Bronfman admits, they haven't actually got a business model which can produce the returns they need to justify their current structure. So why bother?

Seriously, Edgar: it's like you opened a bed and breakfast on a mountainside, and a mudslide has washed away the only road in. But you're still having helicopters come round delivering eggs and bacon and Corn Flakes - sure, you're filling the cupboards with food nobody will eat, but you better keep on stocking up while you work out a new business model.

In fact, that should have been what Warners announced today: a massive pile of bacon slowly rotting in an empty guesthouse.

Good news for EMI, sort of

The team at Terra Firma will be opening extra bottles of Orangina this morning, as EMI share figures that look better than you might have expected.

Partly, this is down to a reduction in returns (a digital dividend - less physical product means less unsold physical product) and cost savings (or sacking people, as it's also known), but mainly? It's because of currency fluctuations:

Net sales increasesd just 4% io £1,072 million ($1612M USD). Excluding the currency impact, sales were down 10%, slightly more than the contraction in the overall industry.

So EMI's success is mostly down to the change in the value of the pound. To be fair, persuading banks to back the Terra Firma takeover of the company, EMI did do a small bit to help hasten the economic doom, but I'm not sure they'd suggest that it was part of a strategy to turn the company around.

Even with the real decline in sales, though, it's worth noting that EMI still had revenues of £163million - the old music industry's claims of penury are a little overplayed.

Warners not trying to unseat Apple

That's what they said, anyway, during the revelation of their $23million profit from last year's trading:

"I have a lot of heart for the access models that are being developed in the mobile space - increasingly, there will be competition for Apple. Having said that, Apple continues to grow its business with us. This notion that somehow we need to dethrone Apple is not a notion we need to spend a lot of time on - so long as they continue to allow us to make the progress we have ... they allow us to innovate ... It's already served as a pretty good model for the industry and will continue to do so."

This sudden relaxed attitude towards Apple may well have less to do with Warner's excitement at the prospect of mobile music, and more to do with Apple's belated embrace of variable pricing. Oh, and the increasing obvious failure of Microsoft to offer any sort of viable competition.