Pandora Media Inc (P)’s Music Service Still Beats All Others

Pandora Media Inc (NYSE:P) emerged in 2005 with its Pandora Radio “music genome project.” The online streaming service went beyond simply airing straight radio, adding a thumbs-up, thumbs-down approach that allowed listeners to create radio stations that match their own personal music tastes.

It’s a model that is as-yet unmatched in the streaming-radio market. Apps like Spotify and iHeartRadio have given it a try, but Pandora Media Inc (NYSE:P) boasts 200 million registered users, 100 million of which have joined in the past two years.

Commercial breaks

Until recently, however, “success” for streaming radio businesses meant simply losing less revenue each year than competitors. With the majority of online streaming customers choosing the free version of services rather than paying a monthly subscription fee for less/no ads and unlimited listening, Pandora and its competitors have had to rely on ad revenue.

The cost of providing uninterrupted, high-quality streaming service to hundreds of millions of users is difficult to offset by ads without negatively impacting the listening experience. Pandora Media Inc (NYSE:P) has, so far, done a good job of working ads in without bombarding listeners with ads, but it comes at a cost: Pandora lost $28.6 million in the first quarter of 2013, which was $8.6 million more than it lost in the same quarter in 2012.

Revenue for Pandora Media Inc (NYSE:P) is up, however, with the company raking in $125.5 million in revenue in the first quarter, up 55% from last year at the same time. Pandora Media Inc (NYSE:P) now holds 7.7% of the U.S. radio listening market, notable since Internet radio has always struggled to compete with traditional listening. Last year at this time, Pandora only had 5.86% of the radio-listening market.

Trouble may loom for the company, however, as Google and Apple are both headed into streaming radio. Google has already started, releasing its Google Play Music All Access earlier this month. For $9.99 a month, listeners can access music in their Google Play locker alongside songs available for streaming–Google is said to be working with three major music labels to ensure users have access to the best songs.

Meanwhile Apple’s iRadio is rumored to have hit a few snags on its way to release. The problem appears to be an issue between Apple and Sony over licensing fees for songs that listeners skip halfway through. The company is expected to launch iRadio at the June developers conference, but with money issues lingering, analysts are predicting a possible delay.

Traditional radio competes

While Google and Apple are on the horizon, Pandora also faces competition from the very media company that controls the airwaves. Clear Channel Outdoor Holdings, Inc. (NYSE:CCO), operator of 1200 major radio stations across the country, has made serious strides with its iHeartRadio. What sets iHeartRadio apart from Pandora Media Inc (NYSE:P) is that it allows consumers to listen to the same radio stations they listen to in their cars and homes through a smartphone or computer.