There's Reason to Worry About Pandora
Right when my long-standing position on Pandora
While it doesn't squash my overall bullish thesis, these seemingly impure and ill-timed thoughts might be worth considering whether you're an investor or an observer of the Internet radio space.
When the matter of competition in Internet radio comes up -- and Apple's
Throughout my article history I address these differences many times in myriad ways.
They deal with the way each company pays performance royalties (Pandora uses compulsory licensing, while Apple and Spotify do direct deals with labels) and how they deliver music. The latter matters more in regards to the conversation over Pandora's long-term success.
Pandora claims that because it is radio -- you turn it on, it plays songs it thinks you like with the added elements of refined personalization and music discovery -- it is complementary to pretty much everything else that's out there that is not pure play radio. So, in Pandora's world, it is distinct from Spotify and iTunes (the music library) because both are primarily on-demand services.
But Pandora leaves out two important factors we must address.
Number one -- even a service such as Spotify and, most recently, Rdio, includes elements that are not purely on-demand. They allow users to create stations using personalization and discovery features that might not be as sophisticated as Pandora's Music Genome Project, but achieve the same or similar results. Leaving quality of experience aside -- which does matter -- this is important and often ignored when Pandora addresses the competition issue.