Why Internet radio leader Pandora’s stock declined 7%



Pandora is the leader in the Internet radio space

In the previous parts of this series, we’ve discussed why Twitter (TWTR) and Facebook’s (FB) stock fell so much. But Pandora’s (P) stock received even harsher punishment. Its stock fell more than 7%.

According to a report from Statista and as the chart below shows, Pandora is the leader in the Internet radio market. It has a share of 31% in the otherwise fragmented space. Analysts didn’t expect a 7% fall in Pandora’s stock. But let’s try to analyze the reason for the decline.

The Internet radio market is getting more competitive

When you take a look at the chart above, it seems like Pandora doesn’t have any major competitor. Apple’s (AAPL) iTunes Radio, Spotify, and Google (GOOGL) are all much smaller players. But the Internet radio market is changing fast.

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A few weeks ago, Apple acquired Beats Music and Beats Electronics for $3 billion. This was Apple’s biggest acquisition to date. Apple can integrate Beats’ subscription streaming music service on its devices and make buying the iPhone or iPad more enticing. If Apple continues to gain device market share, it will make its music service even more popular. The reverse would also be true.

A few days ago, Amazon (AMZN) entered into the music streaming market by offering music free to Amazon Prime members. The collection of songs in its catalog is currently very limited. But Amazon can still become a potent player in the music streaming market by acquiring more content. This would be similar to what the company did in the video streaming market.

Recently, Google acquired Songza. Songza is an ad-supported music streaming service. Songza’s unique selling point is providing users with a customized music playlist depending on listeners’ location and mood. A few months ago,  Spotify acquired Echo Nest. And a few days ago, Rdio acquired TastemakerX.

A threat to Pandora


As you can see, lately, there’s been a lot of consolidation in the Internet radio space. This is why there’s a threat to Pandora’s market leadership now. Investors have realized this, so they punished Pandora’s stock yesterday.


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