Pandora sends out bad signal with CEO change

March 28, 2016

The author is a Reuters Breakingviews columnist. The opinions expressed are her own.

Pandora sent out a bad signal on Monday. Chief Executive Brian McAndrews was abruptly replaced with co-founder Tim Westergren, in a worrying sign amid news that the streaming-music service might be for sale. Technology companies that turn back to their creators later in life also have a mixed track record.

The $2.5 bln online-radio business emphasized that management remains 100 percent committed to its growth strategy. That should send antennas up. If that’s indeed the case, shaking up the C-suite is an odd decision. Maybe it means there’s dissension in the ranks about whether to look for a buyer. That could explain the 10 percent fall in the stock price.

Either way, the existing plan isn’t working. The number of Pandora listeners has stalled at about 80 million and the prospects for expansion are dim. Because streaming is radio-like in nature, the company can use music licensing rates set by Congress. Those only apply domestically, however, and international expansion may be costly.

Instead, Pandora must negotiate directly with record labels. A deal with publisher Sony/ATV is a good start. Spotify, however, already has users globally. It also just initiated one of its most comprehensive marketing efforts. Apple, meanwhile, is a deep-pocketed rival trying to build a competing service that caters to its hundreds of millions of device owners.

Westergren, a musician himself who mostly served as an evangelist for Pandora’s so-called Music Genome Project, may be able to speak the language of artists and labels more clearly. The company calls him a former band member and composer “personally committed to advancing the careers of working musicians.”

Even so, starting a new venture and steering a more mature one require different skills. Steve Jobs famously managed both when he returned to Apple. Jerry Yang, on the other hand, had a troubled second stint at Yahoo that included rejecting a $45 billion takeover bid from Microsoft in 2008 that led the internet company into years of strategic disarray. The jury is still out for troubled Twitter and co-creator Jack Dorsey, who was recently brought back as CEO.

It’s not obvious how Westergren can or will turn around Pandora. For shareholders, it may just be the same old song.

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