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

Stocks in this article: PAMZN

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.
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