Google Music Service a Non-Event for Pandora
We have seen this story before. Even though Google's service, at least according to The New York Times , will compete most directly with Spotify, Pandora stock takes a hit.
Are traders and investors just complete fools?
Because, almost one year ago to the day, I wrote a series of articles that foreshadowed what we have seen materialize over the last 365 days. For instance, dateline May 16, 2012, Today Pandora Officially Crushes Terrestrial Radio . The day that piece hit TheStreet, P closed at $11.37. It traded as low as $7.08 in mid-November 2012. Now, we're at $16.75, as of Tuesday's close.
We're not looking at a Netflix
Maybe somebody else says it, more people will believe. Somebody with a name behind them that holds more weight than the spare "Rocco Pendola." Here's an excerpt from a note on the Google rumor from BofA Merrill Lynch back in February:
Pandora does not compete with active on-demand services
It is important to note that Pandora does not compete with active listening streaming services. Pandora is addressing the 80% of all music listening that happens passively vs. the 20% of listening that occurs actively (ie. choosing songs individually).
Put another way -- Pandora competes directly with traditional AM/FM radio. It does not compete -- directly -- with on-demand services such as Spotify. Put another way, you can use the word "complementary" to describe the relationship. You know what you want to listen to so you fire up Spotify, Rdio or your iTunes and punch in that specific song, album or artist. You want a radio experience, you punch up some FM radio and, increasingly, Pandora Internet Radio.
Even if Google or Apple or somebody else launches a direct Pandora competitor, they do not have a superior personalization and recommendation engine that took over a decade to develop (and is still developing) -- the Music Genome Project. As such, they cannot provide the same quality of experience.