With the World Wide Web expanding day by day, giving consumers a big bunch of online entertainment services, there is certainly one such service to watch out for — Pandora Media Inc (NYSE:P). Yes, it is an extremely popular online music service, but there is competition everywhere.
Music sharing
But, I prefer not to use these websites as some of them are marked unsafe by Google Inc (NASDAQ:GOOG) Chrome browser and I would rather stick to a brilliant alternative, which is the internet radio.
“Music Genome Project” by Pandora Media Inc (NYSE:P) has over 800,000 songs from over 80,000 artists and has over 200 million people using this service, as of May 2013. It is an absolutely free-to-use service, but for every four or five songs, there is a short interruption where the user has to listen to advertisements.
Even then, some people opt for the premium account as they can have an ad-free listening experience and high quality sound as well. Advertisements account for more than 77% of Pandora Media Inc (NYSE:P)’s stock price according to the analyst firm Trefis.
Google Inc (NASDAQ:GOOG) had released its All Access music streaming service in May this year. At $9.99, users can now stream songs without any limit. This service has not impressed critics as it is already available at a much cheaper rate via Pandora Media Inc (NYSE:P) and other websites. Google does offer a 30 day trial period, but users have to pay a monthly fee for continued service. Pandora offers free music streaming for 40 hours every month, which gives it an edge over Google.
Pandora Media Inc (NYSE:P)’s reach and concept is promising and its delivery is fantastic, though its cash flow is negative, making it not a very ideal investment yet. But, the fact that smartphone sales are expected to cross 1 billion in 2013 surely means that mobile device streaming and mobile advertising is going to increase rapidly. To expand listening on the road, Pandora has tied up with many companies, including Ford Motor Company (NYSE:F).
The best radio?
Another popular online entertainment service is Sirius XM Radio Inc (NASDAQ:SIRI), which costs about $15 for a monthly subscription, though the yearly subscription costs cheaper. The lifetime subscription scheme, priced at around $500, was taken off long time back, though there are a few lucky ones who had subscribed for this scheme, and I bet they are enjoying it now. Sirius XM Radio Inc (NASDAQ:SIRI) offers a great entertainment experience, but considering other options in hand which offer the service at cheaper rates or even for free, it might not be the first choice of online entertainment for the public.
As per Morningstar’s reports on Sirius, the number of shares traded per month is around 50 million and the stock has jumped from a little more than $0.10 to over $3 per share, which clearly supports the fact that the market has confidence in Sirius and that it does offer more than music. But again, there is competition everywhere, and a lot of ad-based services like Pandora pose a threat, and so do Google All Access and iTunes radio, which have already entered the market.
With over $700 million in free cash flow, Sirius has to take up this opportunity and maintain its programming quality and expand more to mobile platforms and car manufacturers. I would rather sit back and enjoy the music till the company continues to innovate and reward investors.
The success of free
Making over $43 billion in 2012, Google has a much higher level of ad revenue, which shows that if a website is popular and if it continues to innovate, it will certainly make huge profits. Google websites account for over 67% of the company’s income, which highlights the fact that Google keeps much of its revenue in-house, instead of forming partnerships or depending on other companies.
Google continues to dominate as its thirst for innovation never ends. Google has certainly shown no limits in its progress. With a record of over 5 billion searches per day and a cash flow of over $13 billion in 2012, its shareholders can anticipate a dividend.
A little thought
Paid online search is a never a good idea as one never wants to pay to search. Similarly, as Sirius XM Radio speaks for itself, even though paid music subscriptions offer great quality service, its sustainability is a question mark. To think about success, websites need to consider the risks and need to innovate, as only innovation fuels success.
Ashley Sales has no position in any stocks mentioned. The Motley Fool recommends Google and Pandora Media. The Motley Fool owns shares of Google.
The article Investing in Your Choice of Music originally appeared on Fool.com and is written by Ashley Sales.
Ashley is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.
