Pandora's List of Haters Keeps Growing

NEW YORK ( TheStreet) -- If you follow media, particularly radio, you have likely noticed an all-out assault on Internet radio pioneer Pandora ( P).

On one hand, Sirius XM ( SIRI) and the terrestrial radio lobby cannot stop telling us that (A) Pandora operates an unworkable business model and (B) Pandora has not really had an impact in the space. As such, these entities do not stop talking about Pandora. In fact, they continue to launch subtle and not-so-subtle attacks on the company.

Old school radio (terrestrial and satellite) supporters obsess over Pandora so much, it's next to impossible to cover every example. In this article, I include the major salvos and discuss three reasons why Pandora scares Sirius XM and terrestrial radio.

All Talk, Zero Innovation

Arbitron ( ARB), the company that measures, publishes and helps analyze radio listening, takes exception with the way Pandora generates and presents ratings statistics, though it has yet to provide a viable solution. For the record, terrestrial radio giant Clear Channel ( CCMO.PK) provided 19% of Arbitron's revenue in 2011.

Late last year, Katz Media Group, not surprisingly owned by Clear Channel, decided to stop representing Pandora to radio ad buyers.

Mary Beth Garber, a Katz VP and long-time terrestrial radio wage slave, serves as the primary mouthpiece for the industry's efforts to malign Pandora. I have communicated with Garber. I interviewed her for another Web site.

As a former radio personality, I can certainly understand and appreciate her passion. Plus, she seems like a genuinely nice person. While she has clear motives to advocate for broadcast radio, I never felt as if she was necessarily using me to get her points across.

That said, she has done nothing short of embarrass herself recently as she hounds Pandora executives on and offline. Radio industry Web site, AllAccess, reports that Garber is upset because Pandora CEO Joe Kennedy did not answer her questions, regarding his company's reach and its impact, in the way she had expected him to.

Because they both have valid points, I'll put that debate aside. What's really telling in this whole episode, however, is that Garber simply cannot let it go. Not only does she go after Kennedy in the body of an article, she apparently responds in the comments section of the same piece.

For the record, I am not 100% certain that this response comes from the real Mary Beth Garber, but she does have a history here. My introduction to her came via a comment she made on a bearish article I wrote about terrestrial radio. In any event, here's part of the comment to Kennedy posted to AllAccess under the screen name "Mary Beth Garber":

Mr. Kennedy,

I appreciate your Pandoraganda efforts, but I have to question either your knowlfg (sic) of RADAR ratings or your ethics ...

Now -- about the rest of the question you dodged. You claimed that all of Pandora's listening is coming at express expense of radio, not iPod, mp3 or CDs. Reports from NPD, Mark Kassof, iHeartRadio, Arbitron/Edison's Infinite Dial and Jacobs' Tech Survey 8 don't support that contention at all. What resourse (sic) did you use to draw your dubious conclusion?

Thank you,
Mary Beth Garber

To be clear, I cut out her argument, which is, undoubtedly a good one. As I said, both "sides" make good points. But, only one acted in an unprofessional fashion. Why is this relevant? A response another commenter posted to Garber sums it up:

You are damaging your excellent personal reputation with your on-going, ill-advised attacks on Pandora. In the same way that we saw a mass migration from AM to FM culminating in the mid 70s by FM surpassing AM, we're seeing that same type of migration from FM to Internet radio ...

You're a talented, classy women (sic). Keep your reputation in tact (sic) and stop attacking this new giant industry (Internet Radio) that will continue significantly eating into terrestrial radio's audience and revenues. Wall Street already knows that terrestrial radio is not a growth industry.

Why would an executive VP at a major company conduct herself this way? Garber is "a talented" and "classy" person, but she's obviously struggling to advocate for a dying industry.

The absurdity does not stop with Garber.

Though more reserved, it extends to Sirius XM CEO Mel Karmazin, who believes Pandora uses a business model that cannot work. Mel does not think it's possible to achieve success monetizing mobile listening. I dispute that inane contention elsewhere on TheStreet.

I cannot help but wonder why Sirius XM (and Clear Channel via iHeart Radio) will unveil a knock-off version of the "personalized" radio Pandora created, later this year. Mel finds that feature attractive enough to "super-serve" current subscribers. However, this move amounts to capital invested without a return, as Sirius will apparently not even attempt to monetize it.

An entire old guard establishment -- terrestrial and satellite radio -- is up in arms or critical over every move a supposed inferior being makes. Not only do these folks, especially in terrestrial, talk Pandora down, but they provide the most sincere form of flattery by imitating the very features Pandora has made popular.

So, why are they scared? I have three simple reasons.

First, Pandora continues to grow unabated. No matter how hard Garber and others come at them or how often Mel riffs about Pandora's business model, the company continues to create scale that terrestrial and satellite radio could never dream of achieving. Consider the latest numbers ranking Internet audio listening from Triton Digital:

Pandora's average active sessions and session starts are up from about 600,000 and 232.6 million, respectively, year over year. Nothing, not even Spotify, seems to be able to slow down Pandora.

Second, Pandora appeals to 18-34 year olds. Sirius is not even a credible player in that ballgame. And terrestrial radio, outside of a handful of talk and rock-formatted stations, has experienced limited success in a demo that matters to advertisers.

Take it from me. I spent the middle portion of my 37 years going on sales calls with reps for stations I worked for. We had limited success selling advertisers on the notion that radio could draw in young people. And, at the time, I was a 20-something-year-old talk radio host.

Third, Pandora can not only target 18-34 year olds with its advertising, it can home in on the location and even musical tastes of these and other listeners. And it does this with the types of ads that are social, relevant and interactive. Pandora is, slowly but surely, moving the industry away from the standard 30-second "spot." The recent deal between Pandora and Intel ( INTC) provides evidence of this evolution.

Tech and new media companies respect Pandora because Pandora is one of them. They have tunnel vision. Pandora is a perpetual startup in the spirit of Apple ( AAPL) and Amazon ( AMZN). Pandora does not concern itself with what others are doing. It visions, creates and dictates the future. That's where I will continue to put my long-term money.

At the time of publication, Pendola was long INTC, P; short SIRI.

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