This Day On The Street
Continue to site right-arrow
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
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

How Smart Is Pandora, Really?

Stocks in this article: P GOOG AAPL SIRI CBS

NEW YORK ( TheStreet) -- There's never a dull moment in the world of Pandora (P). So far in 2013 Pandora has had the angels on its side, its stock gaining as much as 110%.

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 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.

Pandora saw this move as a way to combat the American Society of Composers, Authors and Publishers (ASCAP), a no-profit performance-rights organization that protects musical copyrights of its members. ASCAP is able to do this by monitoring public performances of its music -- regardless of how it's broadcast.

Essentially, ASCAP is an overseer of licenses and music royalty rates, ensuring that its members are compensated accordingly. While that's great for the artists and the rights holders, it's painful for companies like Pandora that rely heavily on content, especially when Pandora has to cut a check each time the music plays.

1 of 2

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

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
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

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

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, 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
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 18,030.21 +6.04 0.03%
S&P 500 2,081.88 -0.29 -0.01%
NASDAQ 4,773.4720 +8.0480 0.17%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs