US satellite radio service SiriusXM reported a 2% year-over-year drop in revenue in the first quarter of the year, due in part to the continued decline in Pandora’s monthly active users.
In the three months to end of March, Pandora’s user base shrank 8% from a year earlier, or by 3.9 million YoY, to 46.7 million MAUs from 50.6 million, according to SiriusXM’s first-quarter financial results published Thursday (April 27).
That 46.7 million figure for Q1 2023 was also down by 900,000 users vs. the prior quarter (Q4 2022: 47.6m, see below)
SiriusXM has been struggling to retain Pandora’s user base since its $3.5 billion all-stock acquisition of the streaming company in late 2018.
The struggle comes amid increasing competition in the music streaming space and changing consumer preferences. Pandora rivals Spotify, Apple Music and Amazon Music have continued to assert their dominance in the market with new features like personalized playlists, exclusive content and advanced music discovery algorithms.
Another reason for Pandora’s decline in subscribers is changing consumer preferences, with many listeners moving away from traditional radio-style services and are instead seeking out more personalized options.
In comparison to Pandora’s 46.7m MAUs, Spotify added an additional 5 million Premium subscribers to its user base in Q1, bringing its total global paying subscribers to 210 million.
SiriusXM Chief Executive Officer Jennifer Witz told analysts during the company’s Q1 earnings call that they added a Pandora Premium four-month trial offer in the past quarter, “making it even easier for trialers to transition into paying subscribers.”
Still, Pandora witnessed a continued drop in its self-pay subscribers by 2% (or by 106,000) to 6.2 million in Q1.
In contrast, SiriusXM’s self-pay subscribers for its live radio broadcast app added 26,000 users in the first quarter from a year earlier to 32 million.
The group’s revenue edged down 2% to USD $2.14 billion from $2.19b in the year-ago period, largely due to a 1.28% drop in subscriber revenue to $1.69b from $1.71b. SiriusXM also registered lower revenue in advertising and equipment sales.
In Q1, Pandora’s ad hours fell 4% YoY to 2.59 billion even as hours per active users climbed 4.5% to 21 hours per month.
“Here, you’re seeing the normal effects of seasonally light ad revenue in the first quarter, combined with recent ad headwinds plus the CPI inflator to web streaming royalties,” said Chief Financial Officer Tom Barry.
SiriusXM’s net income plunged 25% YoY to $233m from $309m on account of the falling revenue and the 3.3% jump in total expenses to $1.73b from $1.68b.
Pandora’s revenue from subscribers fell 2.3% to $128m from $131m, while the platform’s ad revenue also slipped 1% to $334m from $336m.
SiriusXM’s Q1 result highlights the current state of the company’s financial health.
Back in March, the company said it was reducing its headcount by 8%, or by 475 roles, affecting “nearly every department.”
The layoffs follow the company’s assessment of “today’s uncertain economic environment,” said CEO Jennifer Witz at the time.
SiriusXM, like many other companies, has been impacted by the COVID-19 pandemic and other factors such as higher interest rates and fears of a looming recession.
In January, Spotify said it would also be trimming its global workforce by 6%.
Despite the lackluster earnings in Q1, Witz said Pandora’s results “were better than we expected, certainly based on where trends were heading in December or January.”
“We had a really solid quarter with ad revenue down just 2%. And I believe that’s because we were really well-positioned to capture late in-quarter demand that came in as advertisers started to open up their budgets because we have these programmatic solutions across music streaming and podcasting.”
Jennifer Witz, Pandora
“We had a really solid quarter with ad revenue down just 2%. And I believe that’s because we were really well-positioned to capture late in-quarter demand that came in as advertisers started to open up their budgets because we have these programmatic solutions across music streaming and podcasting,” Witz said during an earnings call.
Witz is also bullish on podcasting, with SiriusXM’s ad revenue up 34% YoY. The CEO attributed the growth to “the great content relationships we have on the representation side.”
“We’re really well-positioned on the podcasting side. Certainly, there’s still uncertainty in the second half, I think, but we are hopeful that the market will continue to recover and the great thing about our guidance is that even the cost reductions we put in place, we’re really well-positioned even if the market trends a little softer going forward,” Witz added.
Music Business Worldwide
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