Apple struggles to woo record labels
Apple’s proposed iRadio, which will be similar to Spotify’s streaming service, is running into problems with publishers and record companies. While Pandora caught a break with a government-approved license for streaming, Apple Inc. (NASDAQ:AAPL) is having a hard time wooing music publishers, as many labels are seeing flatter returns on music sales since the dawn of online streaming. It doesn’t have Pandora’s luxury of being the first mover in the industry either. Lastly, Apple Inc. (NASDAQ:AAPL) will also be in a bind because of Google’s wide appeal through Android phones and much larger ecosystem to draw customers from.
I expect Apple to have success though once it reaches agreements with the labels that work with them on iTunes, Apple’s still very popular music service. This will give iRadio a real leg up if there is the ability to connect with established playlists and the Genius software built into iPhones and iTunes. It would also help Apple’s innovation problem settle quicker, which has been seen as a drag on company profits and share price, meaning that it would be a better earner for investors than Google, simply because expectations are lower for Apple as of late.
The bottom line: Pandora is better than you think
Pandora will have some stiff competition in the future, but this company is by no means doomed, as some might think. A solid first quarter has helped the company’s image in the eyes of investors, and the gamble to limit free hours has been successful for getting people to pay for a subscription.
With improving mobile advertising, the affordability of Pandora Media Inc (NYSE:P)’s pay service, as well as strong evidence of brand loyalty by its users, it stands to reason that Pandora will be more than able to stand up to Google and Apple in the online music market. Not only that, since Pandora is a one-function company, while Google and Apple are multi-headed beasts, there will be more incentive to innovate on Pandora’s part, while innovation for Google and Apple may be diverted to the smartphone industries, a more lucrative field for these two companies.
If Pandora can turn a profit by next year, something that is attainable according to management, it can not only survive, but also thrive. As the first company in this industry, it has an established following that won’t go away anytime soon, and those looking for a Google-lead death blow for the company will be disappointed. Meanwhile, investors who remain faithful to Pandora Media Inc (NYSE:P) will be rewarded over the long term as the company matures.
The article Why Pandora Isn’t Doomed originally appeared on Fool.com and is written by John McKenna.
John McKenna has no position in any stocks mentioned. The Motley Fool recommends Apple and Google. The Motley Fool owns shares of Apple and Google. John is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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