Remarkably, investors continue to pile money into Pandora even as rival services from Google's (GOOG) All Access and Apple's (AAPL) iTunes Radio have emerged. Unlike previous years, Pandora seems to have developed bullet-proof resistance from concerns that would have otherwise punished the share price.
While I don't disagree that Pandora's management has been pushing all of the right buttons, I wouldn't advise investors to press their luck too much. Rising content costs is still a major issue here. Also, I don't believe that Pandora has effectively addressed its ability to monetize its business model.
That said, I will give Pandora credit for being smart enough to at least think "outside the box" to mitigate the impact of these costs. But how well will it work?Last week, when I read on TheHill.com that Pandora had acquired KXMZ-FM, a South Dakota radio station, I thought it was a joke. I immediately went to the Securities and Exchange Commission Web site to make certain that it was real. Sure enough, it was. But what would Pandora, an Internet radio company, want with a terrestrial radio station? Terms of the deal have not been disclosed so I couldn't scrutinize the financials the way I wanted. However, I can say that contrary to popular opinion, this deal had nothing to do with Apple nor, for that matter, was this deal influenced by competitive positioning with Spotify or Slacker or Sirius XM (SIRI). Was it bizarre? Absolutely! It was also pretty darn smart.
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