Pandora Media Inc (P): Apple Inc. (AAPL)’s Fastest Growing Business Is Underestimated

But advertising is not providing enough revenue to cover content costs, so Pandora has been promoting its subscription service. The company added nearly 700,000 subscribers to its ‘Pandora One’ subscription service in the quarter, bringing the total to 2.5 million and showing that it enjoys strong loyalty from its audience.

Pandora Media Inc (NYSE:P) won`t be easy to beat but, just like traditional radio, online radio will most likely have room for several successful players operating at the same time.

In a business in which profitability is scarce and licensing costs are a heavy burden for most companies, Apple´s financial muscle could represent an important advantage for the company. Besides, unlike Pandora Media Inc (NYSE:P) and Spotify, Apple will not need to build its user base from zero since it already has a close relationship with millions of users around the world.

iTunes radio may cannibalize music downloads to some degree, but it could also be instrumental when it comes to promoting songs and generating more sales. Listeners may end up buying the tracks they hear on iTunes Radio, and that could mean a double win for Apple.

Bottom line

Digital content, software and services serve an important purpose when it comes to differentiating Apple Inc. (NASDAQ:AAPL) from the competition. But at the same time it’s a big and growing business which has considerable potential in the middle and long term. The iPhone and the iPad are Apple´s present, but the company´s future could be increasingly tied to iTunes/Software/Services.

The article Apple´s Fastest Growing Business Is Underestimated originally appeared on Fool.com and is written by Andrés Cardenal.

Andrés Cardenal owns shares of Apple. The Motley Fool recommends Apple and Pandora Media (NYSE:P). The Motley Fool owns shares of Apple.

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