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Absolutely Horrible News For Pandora

NEW YORK ( TheStreet) -- Pandora (P - Get Report) needs a plan B ... badly.

If I was advising the company, here's what I would tell it do ... yesterday (!):

  • Backtrack on the Internet Radio Fairness Act considerably.
  • Push the annual subscription option, but find some way to incentivize it.
  • Cultivate additional revenue streams immediately.

I've got to be 100% honest here.

I feel awful about writing this article.

After having had the chance to meet Pandora co-founder Tim Westergren in person and on the phone over the last year, I came to admire the guy even more than I did before we connected. He's an incredibly bright visionary and one hell of a person to boot.

I have come to know a small handful of people at Pandora. Again, all excellent folks. But I have got to call it like I see it. I can't keep quiet just because I like an individual or a group of people.

Quite frankly, outside of Netflix (NFLX - Get Report), I have not seen a company take a more abrupt turn for the worse in a long time.

Most negative turns develop over time. Think Research in Motion (RIMM), Microsoft (MSFT) and what we might be witnessing with Intel (INTC - Get Report).

In these typical cases, you look in the rearview mirror and point to a historical signpost where a decline began and intensified to a point where it would have taken a Herculean effort to prevent a hard landing.

That's what happened at RIM. That's what happening at Microsoft. And that's what might be happening at Intel.

While you can't call Pandora a company in decline -- it continues to show consistent and impressive growth in almost every key metric -- you can certainly liken it to a company in peril from a strategic standpoint.

I cover what ends up Part One of this somewhat bearish case in Is Pandora Panicking? Should Investors from mid-October.

At that point, I maintained a long-term bullish stance.

Now, I simply cannot be a bull unless Pandora makes profound changes to its approach in the fight over music royalties.

Here's why I am worried.

On Thursday, a large collection of musicians -- about 125 of them -- signed an open letter to Pandora opposing the Internet Radio Fairness Act.

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