Pandora climbs after May listeners rise, talk of lower royalties

Pandora (P) is advancing after reporting May audience metrics and a research firm speculated that a deal between a record label company and radio station owner Clear Channel could pave the way for lower royalty payments. Under the deal between Clear Channel and record label Big Machine announced on June 5, singers represented by the label agreed to cap their royalties from songs played on Clear Channel's websites and streaming service. In return, Clear Channel for the first time agreed to pay the artists royalties for songs played on traditional radio stations. In a note to investors this morning, research firm William Blair wrote that the Clear Channel deal increases its confidence that the royalties Pandora pays to artists will drop. The firm, which notes that Clear Channel did not disclose the financial terms of its deal, believes that the radio station owner is likely going to pay significantly lower royalties than Pandora is now paying. As a result, William Blair believes Pandora's royalties could decline beginning in 2015, when its rates are slated to reset. Separately, Pandora announced today that the number of people who used its product in May surged 52% compared with May 2011, to 35.1M. In mid-morning trading, Pandora rose 31c, or 3.02%, to $10.59.