A previous version of this report misstated which chief executive led Pandora’s acquisition of TicketFly. The column has been corrected.
Pandora Media Inc.’s new chief executive, Roger Lynch, the founding CEO of Sling TV — a successful subscription streaming-television company — seems a good fit for the struggling internet radio pioneer, and investors hoping for a new strategy breathed a sigh of relief Monday.
Shares of Pandora P, -1.32% jumped nearly 3% in after-hours trading on the news of Lynch’s appointment, which removed some uncertainty from the stock. In contrast, the S&P 500 SPX, +0.51% closed up 1% during regular trading.
Pandora has been without a permanent CEO since founder and CEO Tim Westergren stepped down in June, under pressure to resign after Sirius XM Holdings SIRI, +0.26% — which is controlled by Liberty Media Corp. LSXMA, +0.09% — purchased a stake for $480 million, giving the satellite radio company 19% of Pandora’s common shares and three board seats. Pandora also began dismantling some moves by another former CEO, Brian McAndrews, such as its purchase of online ticketing site Ticketfly, in a sale to Eventbrite for $200 million.
Even though Pandora was a pioneer in internet radio, it continues to struggle against the two top music-streaming services, Spotify and Apple Music. The company finally introduced its own subscription streaming service earlier this year, called Pandora Premium, but based on the company’s most recent earnings — which were otherwise better than expected — the service did not get as many new subscribers as hoped, possibly due to its more limited selection of music. Analysts said Pandora Premium added 390,000 paid subscribers in the second quarter, the first full quarter since its launch. Overall, Pandora’s active users fell 2% in the quarter to 76 million, below analysts’ estimates of 77.4 million.
But investors might need to prepare for some more spending if Pandora is ready to grow again. The company just decided to shutter its Australia and New Zealand operations, but it’s entirely possible that under Lynch, it could look at other markets for growth. Lynch’s previous company, Dish Network Corp.’s DISH, -0.04% Sling TV, has a Latin American offering with its Sling Latino, which offers standalone and extra Spanish-programming packages tailored to English-dominant, bilingual and Spanish-dominant Hispanics in the U.S. It also offers channels like El Financiero Bloomberg TV, the only Spanish-language business-news channel, which is broadcast in Mexico and Central America.
In addition, Pandora on Monday added another executive with past international experience to its board, Michael Lynton, who is currently the chairman of Snap Inc. SNAP, +2.03% . Before his five-year stint as CEO of Sony Entertainment, Lynton was CEO of AOL Europe and president of AOL International and Time-Warner International.
Last year, according to the IFPI global music report, paid music-streaming subscriptions grew 60.4%, with developing music markets seeing the biggest growth — China, for example, posted 20.3% growth, India grew 26.2% and Mexico rose 23.6%. Pandora has missed out on all of that growth, since it only offers its service in the U.S.
But if Lynch decides to look outside the U.S. for growth potential for Pandora, more royalties will have to be paid and more deals will need to be made, moves that could be expensive. As BTIG wrote in a report in June, “Global expansion has always been a future opportunity in the mind of the bulls. But in addition to the work needed in licensing deals, it takes cash investment and resources.” At least now the company has some funds with Sirius behind it. And Lynch could be the deal-maker.
To be clear, it’s not at all certain what Lynch will do at Pandora, but investors are hoping for moves that will lead to user growth again.