Pandora Media Inc (P): Lowering Costs With WKRP In Cincinnati?

With the per song rate set to increase more than 25% over 2012 levels in 2015, stepping up now to limit the pain is a good call. This move will also allow the company to benefit from industry-wide contracts that it had been excluded from previously.

Sony’s Cut

Being part of the larger contract negotiations is important. Content has been increasingly in-demand as digital streaming of music and videos has become more common among customers. Sony Corporation (ADR) (NYSE:SNE), for example, was rumored to be the last holdout in Apple’s efforts to get iTunes Radio up and running.

Without a physical radio presence, Apple had to negotiate its music costs on a company by company basis. The content and electronics giant was said to have extracted a 10% of advertising revenue fee, well above the normal 4% rate. That rate applies to any ads around Sony Corporation (ADR) (NYSE:SNE)’s music and could be quite lucrative over the long-term.

This shows the value hidden in Sony Corporation (ADR) (NYSE:SNE), despite the company’s struggles on the electronics side of its business. Although Sony has bled red ink for eight straight quarters, the shares have turnaround potential for more aggressive investors. That’s true even though the shares have rebounded strongly off their lows on news of dissident hedge fund manager Daniel Loeb’s call for a company break up.

Watch and Listen, but don’t Buy

Pandora Media Inc (NYSE:P) is making a good strategic move by buying KXMZ. It isn’t enough, however, to take the company from losses to profits. Add in the device-based entrance of iTunes Radio, and Pandora has a lot on its plate right now. Investors would be best served sitting on the sidelines.

The article Lowering Costs With WKRP In Cincinnati? originally appeared on Fool.com and is written by Reuben Brewer.

Reuben Brewer has no position in any stocks mentioned. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple. Reuben 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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