Absolutely Horrible News For Pandora
If I was advising the company, here's what I would tell it do ... yesterday (!):
- Backtrack on the Internet Radio Fairness Act considerably.
- Push the annual subscription option, but find some way to incentivize it.
- Cultivate additional revenue streams immediately.
I've got to be 100% honest here.
I feel awful about writing this article.
After having had the chance to meet Pandora co-founder Tim Westergren in person and on the phone over the last year, I came to admire the guy even more than I did before we connected. He's an incredibly bright visionary and one hell of a person to boot.
I have come to know a small handful of people at Pandora. Again, all excellent folks. But I have got to call it like I see it. I can't keep quiet just because I like an individual or a group of people.
Quite frankly, outside of Netflix (NFLX) , I have not seen a company take a more abrupt turn for the worse in a long time.
In these typical cases, you look in the rearview mirror and point to a historical signpost where a decline began and intensified to a point where it would have taken a Herculean effort to prevent a hard landing.
That's what happened at RIM. That's what happening at Microsoft. And that's what might be happening at Intel.
While you can't call Pandora a company in decline -- it continues to show consistent and impressive growth in almost every key metric -- you can certainly liken it to a company in peril from a strategic standpoint.
I cover what ends up Part One of this somewhat bearish case in Is Pandora Panicking? Should Investors from mid-October.
At that point, I maintained a long-term bullish stance.
Now, I simply cannot be a bull unless Pandora makes profound changes to its approach in the fight over music royalties.
Here's why I am worried.
On Thursday, a large collection of musicians -- about 125 of them -- signed an open letter to Pandora opposing the Internet Radio Fairness Act.