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Internet radio service Pandora (NYSE:P) saw its shares rise over 20 percent to $14.16 in after-hours trading on Thursday after beating analysts’ expectations for its fourth-quarter losses by 1 cent with an adjusted net loss of 4 cents per share. This was despite the fact that its positive quarterly earnings report was coupled with the news that Joe Kennedy, its CEO for nearly 10 years, was resigning. Although much of this rise could be attributed to Pandora’s $125.1 million, or 54 percent increase, in its fourth quarter revenue; at least some of Pandora’s gains could also be attributed to the news that Apple’s (NASDAQ:AAPL) launch of its competing music-streaming service would be delayed due to negotiation difficulties with record labels over royalty rates.
According to The New York Post, Apple made an initial offer to the record labels to pay 6 cents per 100 songs streamed, which is half the rate that Pandora currently pays. The Post reports that “music label insiders suggest Apple — which is sitting on a cash hoard of roughly $137 billion — ought to pay at least the rate set by the Copyright Royalty Board, or about 21 cents per 100 songs streamed.”
The record labels, which last year fought to defeat the Pandora-supported Internet Radio Fairness Act that would have lowered royalty rates for internet radio services, are seeking a royalty rate as well as a percentage of any ad revenue that Apple derives from its music streaming service. Pandora’s music licensing costs are by far its highest expenditure, devouring almost 61 percent of its total revenue for the year…
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