NEW YORK (TheStreet) -- Earlier this year, I argued that with just 0.3% of its cash Apple (AAPL) could put the hurt on Pandora (P). In this article, I review that assertion and introduce another way Apple could not merely hurt, but absolutely devastate Pandora.
While there's no question Pandora blows iTunes Radio away, the superiority of the consumer platform/product doesn't render Apple impotent.
Because, as I explained in February, on a whim Apple could put the hurt on Pandora in one important area:
Apple could, with the greatest of ease, decide to make weekly iTunes Radio-sponsored concert events across the country a hobby. It could put them on in cities throughout the United States (or the world) consistently. It could live stream them. To do 50-100 of these shows annually -- some grand scale with big names, some with indie and unsigned acts at smallish venues -- would cost Apple nothing ...
(Apple could take control of an area that would) ... build/maintain image, keep (its) ecosystem fresh, help hardware sales ... and generate awareness for and use of iTunes Radio that's not going to happen if you merely go head-to-head with Pandora on the merits of the respective services. Because, again, Pandora wins in that regard. Hands down.
However, thanks to a mix of a lack of resources and a lack of will, Pandora has not competed effectively in areas that can a) drive its core business to new heights, b) improve its positioning in the royalty fight and c) open up new and potentially lucrative (relative to its size) lines of revenue.
In the shell of a nut, Apple could steal the live concert space away from Pandora and use it to drive adoption of iTunes Radio. Of course, as this component played itself out, iTunes Radio would continue to get better just like Apple Maps has.
The effects of that level of salvo would only ding Pandora; however, if Tim Cook decides to get real, look the bleep out. If I'm Apple -- and I'm serious about iTunes Radio -- I take Draconian actions by effectively declaring thermonuclear war on Pandora.
And here's how I would do it ...
I remove the Pandora app from the App Store.
Ever since iTunes Radio was a rumor, I argued Apple would not do such a thing. Plenty of reasons existed -- and still exist -- for it not to.
First, Pandora remains a top grossing app in the App Store. At last check, it's number four. Second, lots of people love Pandora. There's a loyalty between the Pandora user and the platform. No doubt about it. So, if Apple yanks Pandora, it would lose money and probably face considerable backlash from iOS users.
That said, Apple probably wouldn't lose that much revenue by forgoing the cut it receives every time a Pandora listener makes an in-app purchase on an iPhone or iPad to become a Pandora One subscriber. Nobody knows for certain how much Apple makes off of Pandora in the App Store, but I'm confident when I say it probably doesn't even amount to a pimple on Tim Cook's backside. It's likely pocket change to Apple.
As far as the backlash goes ... I've been through radio station format changes a million times. I've seen legendary stations come and go. When the switch gets flipped and a crowd favorite goes away, there's intense outrage. But it usually only lasts for days. Sometimes weeks. In rare instances, months. Apple jettisoning Pandora from iOS is akin, in terms of the emotional aftermath, to the format flip in traditional radio.
Apple could not only weather that storm, it could prepare for it. It could provide some sort of perk to iOS users who will lose the ability to access the Pandora app on their iPhone or iPad. If Apple wants to continue to (misguidedly) try to keep music downloads alive, it could provide freebies to buy songs in iTunes. Or, better yet, it could offer a gift card for use in the iTunes or the App Store to any disgruntled (former) Pandora user that wants one.
Bottom line -- Apple has options. Pandora doesn't.
If Pandora thinks it could fall back on Android after getting booted from iOS, its CEO has less sense than I thought he did in the first place.
Apple hasn't even introduced the large-screen Android-killing iPhone 6 yet iOS continues to gain domestic marketshare as Android loses it. And, remember, that's (pretty much) Pandora's only game -- the US.
So the timing is ripe for Apple to take the most drastic measure of all drastic measures ... it's gaining on Android on the eve of introducing a smartphone (or two) that will help it eat away at if not completely eliminate Android's lead. Very few people would drop their iPhone simply because Pandora's gone from it. Too many other options exist to justify the switch. And lots of present Android folks will soon be switching to what will be an irresistible iPhone 6.
The more I think about this, the more it sounds like an absolute no-brainer. And, sadly, as far as I know there's nothing Pandora could do about it. If people at Pandora are reading this, the thought must turn their stomachs. If they're reading this at Apple (particularly in the iTunes wing of the building!), they've got to be wondering why this hasn't happened yet.
Imagine if this went down ... we would instantly stop questioning if Tim Cook has the killer instinct Steve Jobs was known for during his hyper-aggressive reign at Apple.
--Written by Rocco Pendola in Santa Monica, Calif.