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

Sell Pandora: It's About to Become a Thing of the Past

Spotify and The Echo Nest Could Be an Actual Pandora Killer

Contrary to what McAndrews, the Pandora CEO, thinks, Spotify joining forces with The Echo Nest is a brilliant move that could have terrifying repercussions for Pandora.

First, Spotify might have just generated a whole new line of revenue for itself. There should be about zero concern over The Echo Nest customers leaving because of the acquisition. The ones that do leave end up biting the hand that feeds them out of spite. Companies such as Rdio have no leverage whatsoever and should be even more pumped than they were when Spotify and The Echo Nest were separate. If I'm at Rdio I am begging for a buyout.

And I love Rdio's service. I would hate to see it go away. I use it a lot. As much, if not more than I use Pandora. But, again, it's not about radio or the music. It's about who can establish a position and an initial core business in these spaces -- the way Pandora and, to a similar extent, Spotify have -- and then take things to the next level.

That's precisely what the Spotify/The Echo Nest marriage does. It opens the door for the combined company to get even more creative with data. Yes, to create a better listening experience at Spotify and elsewhere, but, more importantly, to start marketing music in ways we have never seen before. By providing record labels, bands and brands with capabilities they have never had to inform and better monetize what they do.

Pandora could be all of this and more now. It could have been doing amazing things with data (outside of standard advertising) for years and, most definitely, over the last year.

But, as Pandora sat idle, terrestrial radio has started to show signs of life, Twitter (TWTR) has smartly jumped in the game and the Spotify/The Echo Nest love fest is about to chart new, exciting and very profitable territory.

TheStreet's Carlton Wilkinson will speak with Jim Luchese, The Echo Nest's CEO at SXSW this week. I expect to spend some time with him shortly thereafter. I expect Luchese to confirm what I already know.

While he's not the type to call Pandora out by name (though maybe he will), it's quite clear that he will (as he already has in comments since the deal) speak to ground Spotify will now cover thanks to its acquisition of The Echo Nest. And it's exactly the ground Pandora's CEO doesn't consider "a significant development" for his company.

He's too focused on an unnecessary redux of what has become the type of stuff complacent companies say because they like hearing themselves talk.

Pandora will remain focused on redefining radio.

What a shame that it feels the need to limit itself.

But that's OK.

OK for the sake of the music industry. OK for the sake of advertisers who hope to do more with music as a marketing tool beyond simple 15- and 30-second spots and basic sponsorships. And OK for the sake of big music data, a multi-billion dollar enterprise set to explode.

It's OK because if Pandora refuses to lead, somebody else will. The players are lining up while Pandora sleeps with a seemingly disingenuous, if not incompetent CEO.

Given the present mindlessness at Pandora, I couldn't, in good conscience, suggest doing anything other than selling. If you have profits banked from the stock's meteoric rise, it's a no-brainer. If you're chasing it, I have to think better situations exist where you might want to allocate some risk.

In fact, with the developments of the past few weeks in mind, it might make sense to put together a little cash stockpile to hop on Spotify when it goes public. I'd be surprised if that doesn't happen sometime in 2014 or early 2015. 

--Written by Rocco Pendola in Santa Monica, Calif.

Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks. Rocco Pendola is a columnist for TheStreet. Whenever possible, Pendola uses hockey, Springsteen or Southern California references in his work. He lives in Santa Monica.
5 of 5

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
AMZN $673.26 0.00%
P $13.73 0.00%
AAPL $117.81 0.00%
FB $105.45 0.00%
GOOG $750.26 0.00%


Chart of I:DJI
DOW 17,798.49 -14.90 -0.08%
S&P 500 2,090.11 +1.24 0.06%
NASDAQ 5,127.5250 +11.3820 0.22%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs