Will Spotify and Xbox Music Destroy Pandora?


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While analysts and investors are beginning to see new life in the perpetually imperiled Internet radio service, Pandora's (NYSE: P ) competition continues to rise. What does this mean for the future of the company? Earlier today, Albert Fried & Company upgraded Pandora (NYSE: P ) from Market Perform to Overweight , reporting that the corporation "offers a great service and has a strong revenue growth potential."

"Given the roughly 30% upside to our $13 Target," Albert Fried analyst Rich Tullo wrote, "we think Pandora is a great company and perhaps its shares are a good trade over the next 12 to 18 months."

Tullo may be right about Pandora's near-term future. But what can we expect from the radio service in the coming months?

Critics and music lovers alike have praised Spotify -- one of Pandora's chief competitors -- for offering more options, more artists, more songs, and greater flexibility than Pandora. Apple (NASDAQ: AAPL ) fans cheered when they heard that iTunes Match will offer full music streaming this fall, allowing iOS 6 users to play their favorite songs without having to actually download them. Earlier this month, Microsoft (NASDAQ: MSFT ) announced that it will enter the music streaming market with Xbox Music , a promising new service that has already acquired more than 30 million songs.

These are just a few of Pandora's competitors, and new ones seem to appear every month. For a brief time last year, Turntable.fm became the next-big-thing in online music. Grooveshark is often cited as a free and superior alternative to virtually every music service out there. In just five days, the new iPhone app from Songza (a social radio network that lets users create their own stations) was downloaded by more than 500,000 people .

With so many competitors, how can Pandora ever keep up?

Truthfully, we could ask that question about every streaming music service. Downloadable music may belong to Apple and iTunes, but streaming music is anyone's game.

Pandora has one advantage, however: time. The company has been around for roughly 12 years and has acquired 100 million users. Pandora continues to be the first website people think of when searching for Internet radio. There may be better music services out there, but many consumers are slow to adapt . This gives Pandora some time to improve its service, to improve its share price, and to milk the millions of users it has already obtained.

Follow me @LouisBedigianBZ

(c) 2012 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing Stocks
Referenced Stocks: AAPL , MSFT , P

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