Pandora Media Inc. (P), the largest online radio streaming service provider in the U.S., is suffering from growing competition in the broadcast radio industry. Despite a healthy auto industry, the driving force of broadcast radio services, the stock price of Pandora slides by 8.55% to $17.97 yesterday. This somber condition is mainly due to growing competition from satellite radio operator, SIRIUS XM Radio Inc. (SIRI), and the upcoming iTunes online radio service of Apple Inc. (AAPL).
Pandora provides music services to laptops and next-generation smartphones, mainly, iPhone and Google Inc. (GOOG) developed Android-based mobile devices. Pandora is currently available in 100 different car models. The company had 71.1 million active listeners at the end of Jun 2013.
Meanwhile, Pandora is expected to face a major challenge from Apple. The company is on the verge of introducing iTunes radio service, which will offer hands-free voice control in automobiles. The connected car concept generates majority part of its revenues from the broadcast radio industry. While Apple will enter this segment with online streaming services, the satellite radio operator, SIRIUS XM, is continuously gaining market share.
SIRIUS XM recently announced that it has added a net 715,000 customers in the second quarter of 2013. This is a record-breaking achievement for the company. Its total subscriber base has crossed 25 million. On the other hand, Pandora stated that its listener’s hours in Jun 2013 were 1.25 billion, which was 100 million less compared with May 2013. Similarly, Pandora’s share of the total U.S. radio listening market slid to 7.04% in Jun from 7.29% in May 2013.
Nevertheless, Pandora has also made significant inroads into the automotive aftermarket sector. Currently, it has business agreements with 8 manufacturers. Management seems confident to counter the competitive threats with new innovative products but that may raise the company’s marketing and R&D expenditures. Currently, Pandora has a Zacks Rank #3 (Hold).
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