Pandora's (P) Big Day is Today, Here is What to Look For - PiperJafray

The Copyright Royalty Board (CRB) will publicly release its royalty rate-setting decision for the years 2016-2020 on December 16. Pandora's (NYSE: P) current rate per 100 songs is $0.14; Pandora is proposing that based on direct label deals, the new rates for the 2016-2020 time frame should be $0.11-0.13, while SoundExchange suggests the rates should be in the $0.25-0.29 range.

Piper Jaffray analyst, James Marsh, expects the rate to be settled at 16 cents; consensus is approximately 17 cents.

In the current Web IV proceeding judges had access to a number of direct label deals for non-interactive plays, and while not done with the big three labels, we believe they are largely done at or below Pandora's current rates.

The actual rate is important but there are a number of details that will be critical in the future for Pandora's direct negotiations with labels:

1) the gap between the ad-supported rate per track vs subscription based (our est. $0.16/$0.26)

2) minimum % of revenue (25% previously)

3) CRB's definition of revenue (streaming revenue vs total revenue).

These details will play a critical role in Pandora's future direct deals with major labels, which should increase Pandora's functionality (on-demand play, unlimited skips, global licensing, replay and offline functionality).

No change to Neutral rating.

For an analyst ratings summary and ratings history on Pandora click here. For more ratings news on Pandora click here.

Shares of Pandora closed at $13.06 yesterday.

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