In its recent 10-Q, Pandora noted the potential problems that could arise as more users use its service. " Given the royalty structures in effect with respect to the public performance of sound recordings in the United States, our content acquisition costs increase with each additional listener hour, regardless of whether we are able to generate more revenue," it said. "As such, our ability to achieve and sustain profitability and operating leverage depends on our ability to increase our revenue per hour of streaming through increased advertising sales across all of our delivery platforms. To date, we have not been able to generate additional revenue from our advertising products as rapidly as we have been able to grow our listener hours on mobile and other connected devices, which have experienced significant growth."

Pandora has nonetheless racked up more than 150 million registered users, successfully competing with rivals such as Spotify, Turntable.fm and iHeartRadio. While the Oakland, Calif.-based company has deflected these competitors, however, it has not faced a rival like Apple.

Apple entering a space it's already entrenched in with iTunes would vastly hurt any chances of profitability for other companies, given its largesse and vast number of iOS devices it around the world.

Pandora shares sank 17% the day the article in The Wall Street Journal suggested Apple was getting into the Internet streaming business, and have not recovered.

Pandora shares are higher in Thursday trading, up 2.46% to $10.84 on the acquisition chatter.

Interested in more on Pandora? See TheStreet Ratings' report card for this stock.

-- Written by Chris Ciaccia in New York

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