Pandora’s growth & future hit by Apple Radio Talks

Yesterday we talked about Apple iRadio to hit soon the market since agreements with warner music are in process. Today, we got confirmed update on this agreement. The Wall Street Journal reported that Apple has finally signed a deal with Warner Music Group by giving them 10% of its ad revenue. The agreement will allow Apple to stream music to its iRadio service. The news took the industry by storm, especially analysts at Pandora.

Apple to start streaming service

Pandora yesterday ended with $1.80 downage and traded its share at $15.22. The agreement posed threat towards future of Pandora. Pandora is way smaller than Apple in terms of revenue and company size. The company started worked really hard to be a market leader in radio industry but it seems like Pandora is soon going to face its toughest and biggest competitor.

Now let’s talk about Pandora again. Micheal Pachter said that Apple’s Internet Radio service will be “a hiccup in Pandora’s growth”. He further added that still Apple has to make its way up to compete Pandora. Pandora would not be a easy competitor, since Pandora has more than 200 million registered users in US only reported in April. Further, the serviceability of Pandora differentiates it from its competitors and make it market leader.

Let’s see what Micheal Pachter has to say about it:

“I think it is unlikely that Apple’s service will be effective, but because it’s Apple, a lot of consumers will give them the benefit of the doubt, I don’t think that people will quit Pandora to use Apple, but expect that usage will drop while people try the Apple service.”

Apple as compared to Pandora is way bigger in terms of revenues and company size. Currently Apple has more than 400 million active iTunes users; since iRadio will be connected to iTunes therefore iRadio will not face any problem in being recognized by users. Spotify which is a subscription based radio also faces threats by upcoming Apple’s radio service.

The big news is Apple Internet Service for sure is new upcoming blockbuster in market. The bad news for Pandora and Spotify is that they might be losing a big chunk of their listeners in upcoming days.