FYI: What Spotify Just Announced, Pandora, Rdio Already Do

NEW YORK (TheStreet) -- The media will go into hype mode as the official release of the week's big Spotify news just hit.

In fact, as of late morning, investors had knocked shares of Pandora (P) down by about 5%. That's modest, relative to how wildly P used to gyrate on news it was about to get "crushed."

There will be no crushing here.

If you have read me for more than a minute, you know I love all Internet radio. It's, by far, the best space we've got working for us as consumers. And, for the most part, it's pretty imaginative. There's tons of great stuff happening from tiny, but sharp, bootstrap startups to behemoths such as Yahoo! (YHOO) quite possibly set to shape new multi-billion dollar categories.

So this is not a Spotify bash. It's just a reality check for a sector filled with sensationalized misinformation.

The move to free mobile listening -- the most talked about from the aforementioned announcement -- comes as no surprise. That's Pandora's bread and butter. And Spotify needs scale.

It needs scale because it needs to show growth in listenership to justify its cash burn. While I don't buy all the Spotify-to-Netflix (NFLX) comparisons, they do have one thing on common -- both companies keep investors and observers confident by showing user growth.

Spotify also needs scale to be able to sell a meaningful amount of advertising, particularly on mobile, an area where Pandora has, and this is understating things, a head start.

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