Please ensure Javascript is enabled for purposes of website accessibility

You Know It's Bad When Even LeBron James Won't Pay For Pandora

By Rick Munarriz - Oct 17, 2017 at 5:24PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The streaming service gets a love-hate plug from an NBA superstar, but when it comes to paying for Pandora we're all LeBron James.

Pandora (P) has been struggling to get its freeloaders to pay up for its premium offerings, the one thing outside of its stagnant user base that's been weighing on the stock. It's a pretty big problem when even rich celebrities aren't willing to put up with ads before throwing a few bucks Pandora's way.

LeBron James raised more than a few eyebrows in an ESPN piece that aired during Monday Night Football. In a Rachel Nichols interview with James and longtime friend Dwyane Wade, the two reunited teammates went off on how cheap James can be despite the NBA superstar's life-altering wealth.

James confesses that he's so frugal he won't use his smartphone if there isn't free Wi-Fi to be had. He's also not paying for apps.

"I've still got Pandora with commercials," James said. 

He goes on to illustrate that he'll be listening to "great music" on Pandora at home when an ad comes on for a giveaway to see James play at an upcoming Cleveland Cavaliers game. Nichols reminds him that he's rich.

"I'm not paying for it," James concludes. "I'm not paying."

That -- in a nutshell -- is Pandora's problem.

Pandora's app on a car dashboard.

Image source: Pandora.

I'm taking my talents to Spotify

Pandora is a pioneer in streaming music, so it's not a surprise that it's still drawing a large crowd. There were 76 million active listeners by the end of the second quarter, down from 78.1 million a year earlier but still a substantial audience. Its problem is getting those listeners to pay up the way they do for Spotify or Apple Music.

Unfortunately for Pandora, just 6% of those 76 million listeners -- 4.86 million -- are paying customers. Pandora offers commercial-free Pandora Plus, and earlier this year it introduced the Spotify-like Pandora Premium on-demand music service. Pandora grew its paying user base by just 150,000 subscribers in its latest quarter, the first full period of Pandora Premium availability. Spotify, on the other hand, is now up to 60 million premium subscribers.

Most people, like James, seem to be fine putting up with ads and a limited number of song skips. It's a problem, and, since Spotify and Apple Music are closing in on a combined 100 million paying listeners, this could be a brand perception problem.

Sirius XM Radio (SIRI 1.30%) might be able to help. It was bent on acquiring Pandora last year, and was able to snap up a minority stake this summer for a lot less than it was reportedly willing to pay a year earlier. Sirius XM knows how to get people to pay for premium audio, and its subscribers pay a lot more than Spotify customers do.

Pandora is playing it cool. The dot-com dud even got James to respond on social media after offering him a premium account for free.

 

Giving Pandora away to arguably the best basketball player on the planet may not do much to improve the value proposition of a premium streaming subscription, but it's free publicity for a pay product at a time when Pandora needs all of the help that it can get.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Pandora Media, Inc. Stock Quote
Pandora Media, Inc.
P
Sirius XM Holdings Inc. Stock Quote
Sirius XM Holdings Inc.
SIRI
$6.21 (1.30%) $0.08

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
311%
 
S&P 500 Returns
110%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 07/02/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.