Recently, Internet radio service provider
) entered into a partnership with Peet's Coffee & Tea. Per
the agreement, Peet's will have its own customized radio stations
on Pandora that will be played at all of its 230 stores located
in the U.S.
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These customized stations will be called Eclectic Classical, Jazz
Giants, Origins and Melodic Indie and will cater to lovers of
different genres of music. All the four stations will offer music
selected by Peet's.
These stations will also be made available to all Pandora
listeners. Peet's alliance with Pandora aims at enhancing
customer footfall in its store. Peet's deal with Pandora follows
its closest rival Starbucks' (the leading coffee chain in the
U.S.) association with
) iTunes to provide customized-in-store music and branded radio
Pandora believes that this partnership will expand its listener
base, which will boost top line growth going forward. However,
since Peet's does not have a significant nationwide footprint
), any direct mileage that Pandora may get on account of the deal
will not be as widespread as Apple's partnership with Starbucks.
However, we note that Pandora enjoys a first mover's advantage in
the music streaming industry. Pandora's already popular service
driven by its effective discovery engine and well established
infrastructure will boost listener base in the near term.
Moreover, Pandora's initiative of launching in-car advertising is
a major positive in the long run. The company's partnerships with
major car manufacturers such as
Ford Motor Co.
) will help it to launch the service in more than 130 models.
Moreover, it also has partnerships with Taco Bell, BP and
However, rising cost of licensing music remains a major concern
in the near term. We believe Pandora's move to raise ad-free
subscription price may result in a higher churn-rate in the near
term. Further, intensifying competition from the likes of Apple
and Spotify remains a major headwind.
Currently, Pandora has a Zacks Rank #4 (Sell).