Despite intensifying competition,
) recently announced that listening hours jumped 28.0% to 1.73
billion in May, 2014, which reflected steady growth in the U.S.
web-based radio market.
However, shares of Pandora were down 2.8% to $23.91 on June 4, 2014
following the U.S. Justice Department's decision to review
decade-old files for paying licensing fees to songwriters and
composers. This may in turn adversely affect the royalties paid by
) and other such music streamers.
Although this may emerge as a major headwind for Pandora, we
believe the company's growing popularity will be a major positive
in the long run.
Pandora's share of the total U.S. radio listening market surged to
9.13% compared to 7.29% in the year-ago month. However, its market
share declined from 9.28% in Apr, 2014.
We believe that the slight monthly decline in market share is
primarily due to the strong competition from Apple, The
iPhone-maker's $3.0 billion deal to acquire Beats Electronics poses
significant threat to Pandora over the long term.
Pandora exited the month with almost 77.0 million active listeners
in comparison to 70.8 million listeners a year ago. Moreover, the
number of active listeners increased from 76.0 million in Apr,
Earlier, on Mar 6, 2014, the company had announced that the May
2014 listening metric will be its final metric to be released on a
monthly basis. However, the company will continue with the
prevalent practice of providing listener metrics on a quarterly
basis in its periodic filings.
It is noteworthy that Pandora enjoys a first mover advantage in the
music streaming industry. We believe that Pandora's already popular
service, driven by its effective discovery engine and well
established infrastructure places it well to compete against the
likes of Apple, Spotify,
Nevertheless, we believe that rising costs related to licensing and
intense competition are the major headwinds in the near term.
Currently, Pandora has a Zacks Rank #3 (Hold).
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