Friday, February 11, 2011

Will Pandora's $100M IPO & Users Kill iTunes?

How Much Is Pandora Cannibalizing iTunes Sales?
I am happy to hear that Pandora announced a $100M IPO today after being rejected by hundreds of VCs who "pooh poohed" their "advertising based" business model many years ago.  Fast forward a few years after Pandora's struggling years and almost shut down.  Pandora currently has 80M users and is raising $100M in an IPO.  This is not good news for music artists who get paid for music downloads and are quickly seeing this business dry up according to inside sources.  What will an artist like Lady Gaga do?  Up her licensing fees or partner with Pandora on a revenue share for advertising fees?

I come from the school that "if its free its me and if I have to pay no way".  I am not a great customer of Apple iTunes because I could care less about owning the music.  I just want to listen to it when I want.  Since I have been a listener to Pandora guess how much music I have purchased?  $0.  Their really is no reason to own music for consumer to want to own music or videos any longer now that advertising based streaming music services like Pandora have arrived.   I always thought the best move for Apple would be to buy Pandora to protect their iTunes music sales but it looks like that is not going to happen.

I predicted that Howard Stern would go to Pandora but that did not happen and he stayed with Sirius / XM and now you can listen to Howard on the iPhone.  I also thought that Apple will buy Pandora but that didn't happen either yet.  Here is a comparison of Rhapsody vs Pandora.  Sirius is also a  Pandora competitor but they need to get an app for the TV quickly.  Broadband speeds have doubled and even tripled over the past few years.  WiFi is very fast and reliable in most areas and 3G is maturing.  So maybe Pandora video is coming also with LTE and 4G wireless distribution?  Stay tuned and buy some shares of this disruptive company.

1 comment:

  1. The first victims of Pandora are terrestrial radio stations (FM). Once you discover the power of Pandora why would you use an FM radio unless you had to. I listen to Pandora via my handheld now more than I do via my desktop.

    If Pandora opens up and innovates a little more they could take a huge share from iTunes but likely only as an affiliate of Amazon in the near term. So far Pandora does not even have a way to buy and upload to your MP3 player, and I suspect that how iTunes keeps the people roped in.

    Pandora has so much untapped potential. I see a lot of upside, and that bodes well for the IPO.

    I have recently discovered in 3 different bars/cafes I frequent that they (the proprietors) have curated their own non-public Pandora stations and use them exclusively for their on premises music. Not sure about the legal issues here but think about the branding opportunities Pandora could enable. If you like a club, you follow their station, you like a DJ, etc. Artists can develop and curate stations. This is powerful shit. But I can not seem to FIND stations in Pandora other then the ones the house creates. I did connect Facebook and I will try that but so far the interface is seriously lacking.

    There is no reason Pandora can not become a fully enabled broadcast platform for streaming audio/video. Rivaling SIRIUS/XM.


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