Chief, 2 other top execs resign at Pandora
Pandora Media’s future became cloudy Tuesday after a purging of its executive ranks swept co-founder Tim Westergren and two other top executives away.
Westergren not only resigned as chief executive for the second time in the Oakland company’s history, but the former musician also stepped away from the company’s board of directors, leaving him with no role in the pioneering online music firm he helped create 17 years ago.
Now Pandora finds itself like a band without a lead singer at a critical juncture, with an interim CEO in charge, four board of directors seats unfilled, red ink on its balance sheet and heavy competition from younger digital entertainment rivals such as Spotify, Apple Music and Amazon Prime Music.
“Pandora is desperately in need of a frontman,” said Michael Pachter, managing director of equity research for Wedbush Securities.
The company announced Tuesday that Westergren, 51, had resigned from both posts immediately. The board promoted Chief Financial Officer Naveen Chopra to interim CEO while it searches for a permanent replacement.
In addition, President Mike Herring, who was promoted to that role in March 2016, and chief marketing officer Nick
Bartle, who only joined in September, also left the company. Herring, who held the chief financial officer role before Chopra, had once been described as Pandora’s savior for his role in cutting costs and boosting ad sales.
A digital entertainment industry veteran is joining the board; he is Jason Hirschhorn, a onetime MySpace co-president, former MTV Networks chief digital officer and former president of Sling Media, which made the Slingbox online TV device.
Earlier this month, satellite radio company SiriusXM agreed to buy a $480 million stake in the company, and will gain two spots on Pandora’s board, which expands from six to nine.
That means four spots are yet unfilled, and the sudden resignations indicate that the remaining board members were “dissatisfied with Pandora’s strategy and felt a change was in order,” Pachter said in a research note. “We think that Sirius may exert greater influence than was previously expected and with a blank management slate to deal with, we think it is likely that Pandora will pivot from its current strategy.”
A company spokeswoman said Westergren was not available for comment. In a statement, Westergren said he is “incredibly proud” of Pandora, a company he co-founded in San Francisco in 2000 and helped direct through stormy times when the music industry was roiled by the transformation from analog to digital.
He served as CEO from 2002 to 2004 and retook the top spot in March 2016 after the ouster of CEO Brian McAndrews. Westergren oversaw the recent launch of a premium on-demand subscription service to better compete in the streaming music marketplace.
“I came back to the CEO role last year to drive transformation across the business,” Westergren said. “We accomplished far more than we anticipated. We rebuilt Pandora’s relationships with the music industry; launched a fantastic Premium on-demand service, and brought a host of tech innovations to our advertising business. With these in place, plus a strengthened balance sheet, I believe Pandora is perfectly poised for its next chapter.”
But Pandora, despite drawing 76.7 million listeners in the first quarter, has been struggling to increase its profits. Hedge fund investor Corvex Management has pushed for changes, including a sale of the company. A report that Westergren, who wanted the company to remain independent, planned to step down first surfaced Sunday on the tech news site Recode.
SiriusXM and Pandora both face competition from rival music services and the changing habits of listeners, Russ Crupnick, managing partner of the music and entertainment industry research firm MusicWatch, said in an email.
The addition of Hirschhorn to the board gives Pandora a leader who understands the music industry, but the company might need “hardcore strategists who can deal with the challenges of the market,” according to Crupnick.
Westergren has been “a lightning rod, sometimes unfairly, sometimes deserved,” Crupnick said. “It was his conviction about Internet radio that made that happen. But the advertising business is brutal, and coupled with content costs, it’s doubly tough. You could certainly argue that the conviction around Internet radio delayed development of an on-demand service and let others gain ground.”
Pachter said in an email that Pandora’s problems also stemmed from its previous decisions to buy ticket seller Ticketfly for $450 million and online radio service Rdio for $75 million in 2015. Both deals were made with McAndrews as CEO. Pandora is now offloading Ticketfly to Eventbrite for $200 million.
Had Pandora not spent its cash on those deals, and had Westergren “not voluntarily negotiated higher rates with the labels, he probably would still be there,” Pachter said. “However, they went from profitable to unprofitable and had to access the capital markets repeatedly in order to fulfill his strategy. And shareholders voted by selling the stock to record lows.”