Apple’s iRadio: The Case Against Pandora Panic
Then Pandora bounced back a bit. But it’s still down 12 percent.
Time to buy, says J.P. Morgan’s Doug Anmuth. He figures Pandora is worth $17 a share. It’s currently trading at $8.20.
I’m not terribly interested in stock prices, but I do think Anmuth’s logic is worth following. My translation of his most recent note here:
If the thought of watching Pandora go head to head with Apple freaks you out, then you should have sold two months ago. Bloomberg’s report advances the story, as we news types like to say. But it doesn’t change it: The market knew Apple was headed in this direction back in early September, when The Wall Street Journal first told us about it.
And, as I explained back then, it’s relatively simple for Apple to launch a streaming music service, using whatever model they want. Unlike the TV industry, the music guys are happy to do business with Apple, and are quite amenable to playing around with different business models. Because their existing business is awful.
So, whether Apple’s iRadio, or whatever they’re calling it, launches in January of next year, or March, or whenever, it doesn’t matter. Pandora is likely to face Tim Cook head-on here, and acting surprised about that doesn’t make sense.
Which brings us to the second point …
Apple can launch a Pandora-killer, but Pandora can do just fine, anyway. Apple makes awesome hardware, and does a great job of integrating that hardware with software. But that doesn’t mean it will do a great job of making a streaming music service people will love.
For starters, this is supposed to be an ad-supported service, and selling Internet ads turns out to be a difficult, labor-intensive process — maybe even more so for Internet radio ads, which require lots of face time with local buyers. Pandora has been plodding away at this for years, with some success. But it seems hard to imagine Apple expending the same kind of effort.
And, while Apple revolutionized the digital music business with its iTunes store back in 2003, that doesn’t mean it succeeds at digital services every time it tries.
Maybe he’s saving that for a future pitch. Or maybe that one didn’t go anywhere.
Finally, remember that while Apple owned the music player market, and it owns the iPad market, it doesn’t own the phone market. So, even if Apple comes out with a killer streaming music service, it’s unlikely that it’s going to make that one available for Android users. Which means Pandora will still have plenty of room to play.
P.S.: By the way? Pandora CEO Joe Kennedy will join us onstage at our D: Dive into Mobile conference in New York next week. Pretty good bet we will talk about this then. We’re sold out, but if you want to get on the wait list, head over here.