Morgan Stanley Comments On Pandora's Royalty Rate Bid For SoundExchange

Morgan Stanley analyst Benjamin Swinburne released a note explaining the outlook for Pandora Media Inc P following the company's royalty rate bid.

Swinburne began by noting Pandora's proposal was less than half of SoundExchange's ask, which would have represented a ~60 percent fee increase for 2016.

The main driver of the large difference in the bid and ask, according to Swinburne, is due primarily to a difference in what benchmark was used.

Swinburne commented, "Pandora uses its own deal struck for non-interactive performance rights, while SX argues that higher rates struck for interactive services (e.g. on-demand services like Spotify) area better benchmark."

Although Swinburne believes non-interactive services is a better benchmark, he warned both sides have an incentive to ask for the extremes and suggests investors do not extrapolate anything for any one side.

Morgan Stanley currently rate Pandora at Equal-weight with an Attractive industry view.