[smacktoward]

> I don't know what exactly the cost of running a Pandora company means financially

Well, Pandora is a public company, so they have to disclose all that stuff. Which means we can look it up! Transparency is awesome.

According to their latest annual report (http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9M...), in fiscal 2012 Pandora brought in $274 million on $285 million in operational expenses.

Of those expenses, $149 million were for content licensing. Product development accounted for $13 million.

Of the money they made, the vast majority ($240 million) came from advertising.

[gizmo686]

At risk of sounding stupid, $274-$285<$0. How does that work?

[endersshadow]

How does a company lose money? They didn't start from nothing--they have money in the bank from equity infusions (e.g.-going public). You lose money if you make less than you spend. That's what happened here.

Edit: Also, these numbers aren't just cash. Revenue is realized when it's earned, not when it's actually paid. So, for example, if Pandora provides $50MM of advertising, and then bills that, it records $50MM of revenue, even if it hasn't received all of that yet. Instead of being counted in cash, it's counted in accounts receivable (commonly abbreviated as A/R). This adheres to GAAP (in the US).