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Expenses Still Outweigh Profits for Pandora

Reports listening at around 2.7 billion in Q4

Online streaming music service Pandora Media says it will remain in the red for at least another year.

Pandora said that 2011 fourth quarter revenue increased to $81.3 million, short of the $83.1 million Wall Street analysts had predicted, according to Thomson Reuters.

That $81.3 million compares to $47.64 million in revenue Pandora reported in Q4 2010.

However as its listening grows, so do its music royalty costs, pushing its net loss to $8.2 million. For the quarter Pandora estimated an adjusted net loss of 18 to 21 cents per share, much larger than the loss of two cents per share that analysts had predicted, according to Thomson Reuters.

The larger music licensing fees hurt the mostly free radio service’s chances of becoming profitable, according to analysts. Total listener hours grew 99% to around 2.7 billion in the fourth quarter, Pandora reported.

Yet Pandora CEO Joe Kennedy said that the company had “just scratched the surface of a $37 billion U.S. market potential.” Kennedy told analysts when the company announced its fourth quarter revenues that Pandora’s radio market share in the U.S. of 5.5% — up from 2.7% within the past year — showed that it had evolved “from being not particular relevant to being very relevant” in a year.

Advertising revenue increased 74% to $72.1 million in Q4, while Kennedy said ad spending in the first quarter of 2012 has been more sluggish.