After a Quarterly Gain, Pandora Warns of a Loss to Come

Pandora Media, the company behind the Internet radio service Pandora, has enjoyed a meteoric rise in popularity. But investors are concerned about its future.

The company reported $120 million in revenue for its fiscal third quarter, which ended in October, up 60 percent from the same period last year. Pandora also had net income of $2.1 million, or 1 cent a share, matching analysts' predictions. The company offered 3.6 billion hours of personalized music streams to its users during the quarter, which amounted to 59 million people.

“This quarter exceeded our expectations as we monetized mobile at record levels and grew total mobile revenue 112 percent,” Joe Kennedy, the compan y's chairman and chief executive, said in a statement.

But the company also lowered its expectations for the fourth quarter and the fiscal year, warning that it would face a loss of 6 to 9 cents a share, greater than it had earlier expected. In a conference call with analysts, Mr. Kennedy said he anticipated a drop in advertising in January because of concerns about the economy.

Pandora's stock closed up 5.5 percent on Tuesday, at $9.45, but once its earnings were released the price fell nearly 18 percent in after-hours trading. The stock was down almost 41 percent from its initial offering in June 2011.

The company faces competition from Microsoft, which recently introduced a digital service, Xbox Music; Apple, which is said to be preparing an Internet radio service, although Apple has not commented on those reports; Spotify and others.

Pandora's licensing costs also weighed on the company. In the third quarter, it paid $65.7 million, or about 55 percent of revenue, in “content acquisition costs,” which include music royalties. The company pays a fraction of a cent in royalties for every stream it serves, which in recent quarters amounted to 50 to 60 percent of its revenue.

Pandora has supported the Internet Radio Fairness Act, a bill that would change how its royalty rates are set (most likely lowering them). But the bill got a cool reception last week from members of a House Judiciary subcommittee.

The bill was expected to expire with the end of the current Congress, but a version of it could be introduced ne xt year. Music groups favored a bill that would also include long-sought changes the royalties paid by terrestrial radio broadcasters.

“It was a huge win to have a hearing on our issue, especially during a lame-duck session,” Harvey Valentine of the Internet Radio Fairness Coalition, which includes Pandora, said late Monday in response to questions about the bill. “The discussion has started in earnest, and that is a big step forward.”

Bob Costas, Gun Rights Commentator and Sportscaster, to Appear on MSNBC

Bob Costas will appear as a guest on “The Last Word,” the MSNBC program hosted by Lawrence O'Donnell, Tuesday night at 10 p.m.

It will be Mr. Costas's first television interview since his commentary Sunday night following the murder-suicide committed by a Kansas City Chiefs football player. Following his comments, Mr. Costas found himself thrust into the middle of the intense debate about guns in America.

He spoke to The Times on Monday to expand on his remarks Sunday night.

Critics, including, some on Fox News (though not its most popular host, Bill O'Reilly, who spoke out in favor of some controls on guns during his show Monday night) attacked Mr. Costas for using the forum of N.F.L. coverage to make a personal political statement. Mr. Costas, in the inte rview with The Times, noted that it is understood that he has a forum on NBC's Sunday night football coverage to speak out on issues that concern him.

He stressed in his more expansive comments on Monday that he was not looking to undermine the Second Amendment protections on gun ownership but rather was seeking what he called “enlightened legislation” to bring what he labeled the country's “gun culture” under some reasonable control.

Bill Carter writes about the television industry. Follow @wjcarter on Twitter.

Netflix Bests Starz in Bid for Disney Movies

LOS ANGELES â€" Walt Disney Studios on Tuesday said it had completed a deal to show films from its Disney, Pixar, Marvel and Lucasfilm banners on Netflix, replacing a less lucrative pact with Starz.

The agreement marks the first time that one of Hollywood's Big Six studios has chosen Web streaming over pay television. Netflix has made similar “output” deals with smaller movie suppliers like DreamWorks Animation and the Weinstein Company, but all of the majors â€" Disney, Paramount, Universal, Warner Brothers, Sony and 20th Century Fox â€" have stuck with Starz, HBO or Showtime until now.

Library titles like “Dumbo,” “Alice in Wonderland” and “Pocahontas” will become immediately available on Netflix, Disney said. Netflix will begin streaming new-release Disney films starting in 2016, which is when the existing accord with Starz expires. The deal announced on Tuesday includes direct-to-DVD titles.

Financial terms were not disclosed. The deal does not include films from DreamWorks Studios, which has a theatrical distribution arrangement with Disney but separately relies on Showtime as a pay-TV partner.

Ted Sarandos, Netflix's chief content officer, called the deal “a bold leap forward for Internet television.” Janice Marinelli, president of Disney-ABC Domestic Television, said in a statement, “Netflix continues to meet the demands of its subscribers in today's rapidly evolving digital landscape.”

The so-called pay TV window is one of the entertainment industry's most important business tools.

In the past, Starz, HBO and Showtime have paid steep licensing fees of about $20 million per picture for exclusive rights a few months after films arrive on DVD. But Netflix - capitalizing on a consumer shift to streaming content on computers, tablets and Internet-connected televisions - has been aggressively going after the business by offering more lucrative te rms.

With the Disney deal, Netflix will be able to offer customers exclusive access to a pipeline of films that are reliably some of the year's biggest box office successes. Netflix has also made it a priority to beef up its children's and family offerings.

What does the loss of Disney mean for Starz? Anything that increases the marketplace clout of Netflix is damaging. Moreover, the premium cable service does not have the original programming strength of HBO or Showtime to fall back on.

Starz will continue to have films from Sony, but the absence of Disney movies will be a hole in its offerings. In a statement on Tuesday, however, Starz said that it decided to part ways with Disney, not the other way around.

“Our decision not to extend the agreement for Disney output past that time allows us the opportunity to implement our plan to dramatically ramp up our investment in exclusive, premium-quality original series which will best meet the needs of ou r distributors and subscribers,” the company said in the statement.

Publicis Groupe Makes an Acquisition, After Explaining the Joy of Acquisitions

Talk about a poker face. On Tuesday morning, at a session of the UBS 40th annual global media and communications conference in Midtown Manhattan, Jean-Michel Etienne, chief financial officer of the Publicis Groupe, spoke frequently about his company's many acquisitions.

Mr. Etienne listed the deals that the Publicis Groupe - the world's third-largest advertising holding group by revenue -  made in the third quarter; discussed the pending acquisition of the giant LBi digital agency; and talked about the 70 acquisitions that the company made from January 2007 through December 2011.

About three hours after he finished his presentation, reporters received in their e-mail in-boxes a news release about another Publicis Groupe acquisition. It was not brought up by Mr. Etienne - not even in a hint.

The agency is AR New York, a well-regarded shop that specializes in working for marketers in fashion, beauty and luxury goods. AR New York was founded in 1996 and wor ks for, or has worked for, brands that include Asprey, Brioni, Dolce & Gabbana, Neiman Marcus, the St. Regis Hotels and Resorts, Valentino and Versace.

The financial terms of the acquisition were not disclosed.

AR New York, which has about 50 employees, will operate as an autonomous unit of the Publicis Worldwide division of the Publicis Groupe. Other agencies within Publicis Worldwide also specialize in luxury goods, beauty and fashion, among them Publicis et Nous and Publicis 133, both based in Paris.

The senior executives of AR New York will remain in charge of the agency, among them Dianne desRoches, chief executive, and Raul Martinez, chief creative officer. They will report to Jean-Yves Naouri, executive chairman at Publicis Worldwide and chief operating officer at the Publicis Groupe.

One reason the Publicis Groupe has been so acquisitive in recent years emerged from Mr. Etienne's response to a question during his presentation. In running the 70 agencies that the company bought from 2007 through last year, he said, the Publicis Groupe was able to increase their operating margins to 17.3 percent from 11 percent.

The Publicis Groupe, which is also based in Paris, comes after WPP and the Omnicom Group in the ranks of the world's largest agency holding companies. Among the other holdings of the Publicis Groupe are Bartle Bogle Hegarty, Leo Burnett Worldwide, Saatchi & Saatchi, the Starcom MediaVest Group and the ZenithOptimedia Group.

Stuart Elliott has been the advertising columnist at The New York Times since 1991. Follow @stuartenyt on Twitter and sign up for In Advertising, his weekly e-mail newsletter.

Digital Notes: iTunes Expands to 56 Countries, Including Russia and India

Apple has introduced its iTunes store in 56 new countries, including Russia, Turkey, India and South Africa, the company announced on Tuesday. The move nearly doubles the number of countries in which the store operates, and is also the latest step in a rush among various digital music services to capture new markets overseas.

With those additions, the iTunes store now operates in 119 countries around the world, and since it was introduced in 2003 has sold more than 20 billion songs. The announcement of its expansion comes a few days after Apple released - a month or so late - the latest streamlined update of the underlying iTunes program, to mixed, but mostly positive, reviews (not counting a few outright screeds suggesting that the program has outlasted its usefulness).

As the popularity of streaming and cloud access for music grows, digital services are sprouting up quickly all over the world, leading to an increasingly crowded marketplace. Subscription services like Spotify, Rdio and Deezer are racing to plant their digital flags around the planet; Google's Play store is heading to Europe; and Microsoft recently introduced Xbox Music, which combines the features of many such services.

The iTunes experience still largely revolves around downloading files, although its newest version more closely integrates its iCloud feature, which gives users ac cess to their collections from any device. Next year, Apple is expected to introduce a Pandora-style Internet radio service, moving it squarely into the growing, streaming market, although the company has not commented on those reports.

SoundCloud Grows: SoundCloud, which has been described as the “YouTube for music” - it lets users upload tracks that can be easily embedded into blogs, Tumblr and other social sites - is also evolving. In announcing a platform upgrade on Tuesday, the company said that 180 million people now interact with it online each month; the company did not update its reported number of registered users, which as of May was more than 20 million, a spokeswoman said.

SoundCloud has caught on with musicians and record companies, particularly in the electronic and dance worlds, as a promotional tool, but it also has accounts from publications like The New Yorker and The Economist, and even a stream from the White House. According to SoundCloud's announcement on Tuesday, some 10 hours of audio are uploaded to the site every minute. (By comparison, YouTube adds some 72 hours of new video each minute.)

Ben Sisario writes about the music industry. Follow @sisario on Twitter.

The Breakfast Meeting: The Royal Pregnancy, and Ailes\'s Offer to Petraeus

The news that Prince William and his wife, Kate Middleton, the duchess of Cambridge, are expecting a baby brought wishes of congratulations from the British public and excitement among the country's news media outlets, who had a grand old time with their royal wedding in April 2011, Sarah Lyall writes. The confirmation by the royal family came early in the pregnancy because Ms. Middleton had checked into a hospital with “acute morning sickness.” Ms. Lyall writes:

Few people could be more excited than the editors of the newspapers and magazines that cover the royal family, who with any luck will have months of things to write about: What will it be, boy or girl? How fat will the duchess look in her pregnancy clothes? What is happening behind closed doors?

Anchors in London the morning after Will/Kate baby news: @todayshow has @NMoralesNBC there, @gma has @LaraSpencer.

- Brian Stelter (@brianstelter) 4 Dec 12

 

In spring 2011, a Fox News analyst visited David H. Petraeus in Afghanistan carrying a message from Roger Ailes, the head of the network: rather than accept the C.I.A. post, as Mr. Petraeus later did, he should insist on being named to the top military post, chairman of the Joint Chiefs of Staff, or better yet, run against President Obama. The message was conveyed by Kathleen T. McFarland, a Fox News national security analyst, writes Bob Woodward of The Washington Post, who obtained a tape of the conversation.

• Ms. McFarland laid out additional points: Mr. Ailes was offering to resign Fox News to run the campaign, and his boss, Rupert Murdoch would “bankroll it.” In an interview with Mr. Woodward, Mr. Ailes confirmed he had told Ms. McFarland to speak with General Petraeus: “It was more of a joke, a wiseass way I have. I thought the Republican field needed to be shaken up and Petraeus might be a good candidate.”

Michiko Kakutani on Tuesday reviewed “The Revolution Was Televised,” a self-published book by Alan Sepinwall, who writes the blog “What's Alan Watching?” The book's goal is to explain how and why a new golden age of TV (primarily cable TV, it should be said) came to be. These “great millennial dramas,” led by “The Sopranos,” but also “The Wire,” “Friday Night Lights,” “Mad Men,” and “Breaking Bad,” he writes, allowed TV to “step out from the shadow of the cinema.” Ms. Kakutani describes their qualities:

bold, innovative shows that have pushed the boundaries of storytelling, mixed high and low culture, and demonstrated that the small screen could be an ideal medium for writers and directors eager to create complex, challenging narratives with “moral shades of gray.”

Noam Cohen edits and writes for the Media Decoder blog. Follow @noamcohen on Twitter.

Home Soda Maker to Join Coca-Cola and Pepsi as Super Bowl Advertiser

An upstart marketer may bring some fizz to the annual advertising bowl that takes place inside the Super Bowl.

SodaStream International, which sells the SodaStream home soda maker system as an alternative to bottled soft drinks, is joining the ranks of marketers that will advertise during Super Bowl XLVII on CBS on Feb. 3, 2013. The SodaStream USA unit of the company is to announce on Tuesday morning that it is buying a commercial that is scheduled to appear in the fourth quarter of the game.

What makes the company's arrival onto the Super Bowl particularly interesting is that the two largest soft-drink marketers, Coca-Cola and the PepsiCo Americas Beverages unit of PepsiCo, are also scheduled to advertise during Super Bowl XLVII â€" and the Pepsi-Cola brand is also the sponsor of the halftime show.

SodaStream, however, has always been adept at generating attention for its products by presenting itself as an underdog and tweaking the mainstream soft-drink makers.

The current commercial for SodaStream  promotes the SodaStream system as a way to save 2,000 bottles of soda a year, which are shown exploding in stores and warehouses each time someone uses a SodaStream machine. “If you love the bubbles,” an announcer says, “set them free.”

The commercial was recently banned from British television on the grounds that it “denigrated” the bottled drinks industry. In its place, SodaStream ran a commercial with the “love the bubbles” line written in white type on a black screen.

Plans call for the creative content of the SodaStream spot for the Super Bowl to echo the themes of the “love the bubbles” commercial but express them in a different way.

The creative agency for SodaStream is called Common, and its founders and senior executives include Alex Bogusky, the former creative wunderkind at Crispin Porter & Bogusky who is refashioning himself as a crusader against products that he deems wasteful, unhealthy or environmentally unsound.

Mr. Bogusky is working on the Super Bowl spot, along with another Common founder and executive, Rob Schuham. Other agencies with which SodaStream USA works are the Cross Agency, for media services, and the HL Group, for public relations.

CBS said in November that it had already sold about 95 percent of the commercial time that it planned to run during Super Bowl XLVII, at an average price in the range of $3.8 million for each 30-second spot.

Among the other marketers that intend to advertise during the game, in addition to SodaStream USA, Coca-Cola and PepsiCo, are A nheuser-Busch InBev, Audi of America, Best Buy, Cars.com, Century 21, the Lincoln division of Ford Motor, GoDaddy, Hyundai, Kia, Mercedes-Benz, Mondelez International (for Oreo) and Volkswagen of America.

Stuart Elliott has been the advertising columnist at The New York Times since 1991. Follow @stuartenyt on Twitter and sign up for In Advertising, his weekly e-mail newsletter.