The co-founder and CEO of Pandora, under intensifying competitive pressure from Spotify and Apple Music, has relinquished his position and will step down from the company board as well.
Tim Westergren, who helped found the company 17 years ago, returned as CEO about 15 months ago with Pandora struggling to match the subscribers heading to rival services. He had also been CEO between 2002 and 2004.
After Westergren's return as CEO in March, the company launched a new $10 a month on-demand music service which lets users select the songs they want to hear, copying what Spotify and Apple Music already offers.
"Tim stepped in to be CEO at a critical time for the company and was quickly able to reset relations with the major labels, launch our on-demand service, reconstitute the management team and refortify our balance sheet by securing an investment from Sirius XM, said board member Tim Leiweke. "We support Tim's desire to identify a new CEO for Pandora's next stage."
But actions taken after Westergren's return may have been too little too late.
John Egbert, an analyst with Stifel Nicolaus, believes the company made some missteps that shifted its focus from the core of its business.
"During his time as CEO, Mr. Westergren did a commendable job repairing fractured relationships with the music industry enabling Pandora to strike direct licenses with labels so it could offer a full suite of ad-supported and subscription listening services, which we think are critical to the company's future," wrote Egbert. "Although we view the concessions Pandora made with the music industry as a necessary cost of building a potentially lucrative subscription business, in hindsight the company also took some major strategic missteps over past few years."
Pandora had 4.7 million paying subscribers at the end of March, while Spotify said it had more than 50 million.
Pandora and other streaming music services use algorithms to determine what listeners want to hear, based on the songs they like and do not like. Ads are played in the free version, but users can pay $5 per month to listen ad-free. Pandora makes most of its money from the free version, bringing in nearly $1.1 billion in ad revenue last year.
Pandora said Tuesday that Chief Financial Officer Naveen Chopra will serve as interim CEO as it looks for a permanent replacement. The company, based in Oakland, California, also said that Michael Herring has stepped down as president and that former MySpace and MTV Networks executive Jason Hirschhorn is joining Pandora's board. Westergren still holds 1.6 million shares in Pandora, less than 1 percent of total outstanding shares.
The executive shakeup comes a few weeks after Pandora made two moves to raise cash: It sold a 19 percent stake in its business to satellite radio company Sirius XM for $480 million and sold a ticket-selling business for $200 million.
Shares of Pandora Media Inc., which are already down 35 percent since the beginning of the year, slipped about 1 percent to $8.38 in midday trading.
