Pandora Media Inc (
plunged 10.1% ($2.73) to close at $24.26 on Sep 23, after its
announced that the iTunes Radio service attracted more than 11
million unique listeners within a week's time.
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Apple released its music streaming service iRadio with its latest
iOS7 mobile operating system for iPhones and iPads on Sep 18.
Since then customers have downloaded iOS7 on more than 200
The iRadio service is designed along the lines of Pandora's
service, which allows users to create stations based on songs of
their choice (including Twitter trends), which they can also
share with friends. The service offers more than 200 free
stations primarily supported by brand advertisements.
Additionally, iRadio offers cross-platform features, which allow
access to users of other platforms including Pandora and
All Access. Apart from close integration with iTunes, iRadio will
also be available on the newly-launched Mac OS and Apple TV
Apple's iRadio service also competes with the Internet radio
Sirius XM (
and Spotify. We believe that Apple's service will quickly gain
significant market share due to the huge popularity of iPhone and
iPad devices and the massive iTunes library.
However, we note that Pandora enjoys a first mover's advantage in
the music streaming industry. Pandora's already popular service
(approximately 72 million users), driven by its effective
discovery engine and well established infrastructure, will
provide significant competition to Apple in the near term.
Pandora recently announced an expanded stock offering (13 million
up from 10 million at $25.00), which will fetch it approximately
$378.8 million. Pandora expects to use a portion of the proceeds
for making strategic acquisitions that will boost subscriber
base. The company will also open new sales offices and compete
with radio stations for attracting local advertising, which is
currently a $15.0 billion market.
However, Pandora expects advertising revenue growth to slow down
and lesser listener hours in the near future, particularly due to
increasing competition. In August, Pandora reported 1.35 billion
listening hours for the month, up 16% from a year ago. Pandora
expects to continue to report losses in the near term.
We believe that Apple's growing influence in the music streaming
industry will increase competition for the likes of Pandora,
Sirius and Spotify. In such a scenario, the quality of service,
strength of brand advertisement and partnerships with leading
music companies will differentiate the operators going forward.
Currently, both Apple and Pandora have a Zacks Rank #3