Pandora Media Inc. (P), the biggest online radio service, said a 40-hour monthly limit on mobile users imposed earlier this year has cut music streaming and content costs as intended, while the audience continued to grow.
Pandora’s results since implementing the cap suggest the company is starting to contain content costs, its biggest expense, without alienating listeners. With fewer hours of use, investors are concerned that the company is also sacrificing advertising revenue, said Michael Pachter, an analyst with Wedbush Securities Inc. in Los Angeles.
“The hours are down sequentially,” said Pachter, who has a neutral rating on the shares. “A lot of that has to do with the mobile cap, which chased away some abusive users, but the company will still have some explaining to do.”
Pandora fell 4.1 percent to $14.08 at 2:46 p.m. in New York after declining 6 percent, the biggest intraday drop in about a month. Before today, the stock had climbed 60 percent this year, outperforming the 14 percent gain in the Russell 1000 Index.Mobile Users