This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Apple's iRadio Looms at WWDC, Cue Pandora's Swan Song

Some call it a battle of "good vs. evil," where Apple is coming to demolish Pandora, "the innocent bystander." First, Pandora is in business as a public company, not as charity, but because it wants to make money. To that end, every competitive rule in a capitalistic playing field applies.

Unfortunately, making money has not been something that Pandora has shown a propensity to do. And it's not going start now. This is despite having more than 7% of the radio market share. And now, with Google's (GOOG) All Access service fully in the mix and Apple's iRadio soon to follow, Pandora will have to work harder to secure a meaningful chunk of the $4 billion per year U.S. mobile-ad market. But it's slipping away. Now, investors are beginning to panic - as they should -- because things for Pandora will likely get worse.

Here's the problem; Pandora needs music to survive -- Apple doesn't. Apple sees music streaming as nothing more than a strategic way to advance its capabilities in services and mobile advertising. And if the company is able to leverage and monetize its half-billion user base, it's a good move. But in doing so, it removes leverage from Pandora against advertisers.

What's more, given the fact that Pandora is already struggling with rising royalty costs, the company will get squeezed out quickly. Many Pandora bulls insist that the company's Music Genome Project will continue to set the company apart. "Apart" from what? There are several other platforms that are just as effective in music discovery -- Apple's iRadio, which will allow users to set their preferences, will likely take the MGP-like feature to another level.

Consider this. In 2012, Pandora reported average revenue per user of $4.42, when adjusting out ad revenue. Even though this figure pales on comparison to a subscription model like Sirius XM (SIRI), which generates ARPU of $12.05, I'm willing to give Pandora some credit here for having grown that figure in a non-subscription dependent model. Unfortunately, though, this performance has never trickled down to the bottom line, where it matters the most.
2 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
AAPL $93.70 0.00%
P $9.09 0.00%
SNE $20.26 0.00%
FB $101.91 0.00%
GOOG $683.11 0.00%


Chart of I:DJI
DOW 15,660.18 -254.56 -1.60%
S&P 500 1,829.08 -22.78 -1.23%
NASDAQ 4,266.8370 -16.7550 -0.39%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs