How do you like them apples, Pandora Media Inc (NYSE:P) investors?
Shares of the leading music-streaming service tumbled 11% yesterday after reports surfaced that Apple Inc. (NASDAQ:AAPL) was just one handshake away from rolling out its own rival music platform.
If I had a dime for every time that Pandora Media Inc (NYSE:P)’s stock took a hit on rumors of Apple introducing a competing service, I’d have nearly a dollar. The latest hit comes courtesy of reports that Apple has finalized negotiations with Warner Music, leaving just one of the major record labels to go.
Apple Inc. (NASDAQ:AAPL)’s iRadio is coming — and the announcement may come as soon as next week’s Apple WWDC powwow — but we’ve known that since last year. Why don’t we wait until it actually launches and succeeds before handing the streaming crows to Apple?
Apple Inc. (NASDAQ:AAPL) certainly commands respect when it comes to digital music, but let’s not assume that it’s going to be a winner just because Apple’s iTunes Music Store is the leading seller of downloads. Being the top dog in music retail didn’t help when Ping — Apple’s short-lived social music experiment — flopped.
Not everything Apple touches turns to iGold.
However, Pandora Media Inc (NYSE:P) isn’t necessarily doomed if iRadio is embraced by earbud-donning music fans. Spotify, Sirius XM Radio Inc (NASDAQ:SIRI), and Pandora have all posted spectacular growth over the years in the face of growing competition.
There will come an inevitable shakeout, but it’s hard to picture Pandora being the first to go. For that to happen, Apple Inc. (NASDAQ:AAPL) would have to set its sights on iRadio as a free service, and that doesn’t seem likely.
Apple charges $25 a year for iTunes Match, a service that allows cloud-based access to your music library. After selling music and only offering a premium streaming platform, would iRadio really be a hub for freeloaders?
Pandora Media Inc (NYSE:P) is exactly that. Just 2.5 million of Pandora Media Inc (NYSE:P)’s more than 70 million active monthly listeners are premium subscribers. That’s a stark contrast to Sirius XM Radio Inc (NASDAQ:SIRI) and Spotify, which rely largely on subscription revenue to stay in business. Apple launching a free service would mean diving into the audio advertising business, and that’s just not the tech titan’s strong suit.
It’s easy to see why Apple Inc. (NASDAQ:AAPL) and anyone else would be gunning for Pandora. Adjusted revenue soared 58% in its latest quarter. Yes, it also has a history of losing money, but analysts feel that this past quarter will be Pandora’s last profitless period.
Apple will make a move in streaming beyond the seemingly unpopular iTunes Match service. That’s a given. However, for Pandora to take a pounding every time Apple grows closer when we don’t know what the product will be, how much it will cost, and how successful Apple can realistically be isn’t fair.
If anything, Apple Inc. (NASDAQ:AAPL)’s entry may be the best thing that ever happened to Pandora Media Inc (NYSE:P). If iRadio fails to gain traction — and that’s certainly on the table given the death of Ping and the lack of resounding success with iTunes Match — there will no longer be any talk about a potential Pandora killer.
The conversation will then become a bidding war for the streaming service that everyone else failed to beat.
The article Apple Hasn’t Killed Pandora Yet originally appeared on Fool.com and is written by Rick Munarriz.
Longtime Fool contributor Rick Munarriz has no position in any stocks mentioned. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple.
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