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Impact of Layoffs on Pandora

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Big US workforce layoffs

Pandora Media (P) is reducing its US (SPY) workforce by 7%, but the company said that the retrenchment will not affect its Ticketfly unit. The layoff is part of its cost-curtailment drive as Pandora pursues profitability.

Pandora is turning to cost discipline at a time of stiff competition in the music streaming business. The company competes for listeners with a host of rivals, including major brands like Alphabet’s (GOOGL) YouTube Apple’s (AAPL) Apple Music, Spotify, and Amazon’s (AMZN) Music Unlimited.

Most of Pandora’s listeners are on the company’s ad-supported service, but the company is expanding into premium services that ask for a subscription fee. For instance, Pandora Plus is an ad-free streaming service that costs $5 a month. Apple Music and Spotify have $10-a-month services.

Pandora has 4.3 million paying listeners, as compared to 20 million at Apple and 40 million at Spotify.

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Layoff to cost up to $6 million

The job cuts will cost Pandora up to $6 million, but the company hopes to save much more in future, given the lower payroll expenses. The bulk of the costs tied to the layoff is expected to be registered in 1Q17.

Pandora’s layoff announcement came alongside an update that revenue for 4Q16, it will exceed its previous guidance. The company projected revenues for the quarter to be in the range of $362 million–$374 million, supported by higher advertising income. Pandora also expects bottom line improvement as it models an adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) loss of $39 million–$51 million.

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