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Shares Of Pandora Media Inc.P-16.71%tumbled Friday, Following News That Apple Inc.AAPL+0.62%is In Discussions
Shares of Pandora Media Inc. P -16.71% tumbled Friday, following news that Apple Inc.AAPL +0.62% is in discussions to introduce a competing Internet-radio service.
"The 800-pound gorilla is pounding his chest, and people are starting to get nervous," said Richard Tullo, an analyst with Albert Fried & Co. "Apple has big competitive advantages. It already has a big reputation in the music industry."
Pandora's shares fell to as low as $9.95 before recovering slightly to finish the session at $10.47, off nearly 17%. Apple shares, meanwhile, rose 0.6% at $688.44.
Pandora, which went public last summer, has become a market leader in advertising-supported Internet radio. The company offers a widely used service whereby users can build "stations" that stream various songs based on selected artists.
However, the Oakland, Calif., company has struggled to become profitable as each additional user of its service tacks on more royalty fees paid every time it streams a song. In addition, Pandora has found it difficult to pull in advertising revenue at a rate commensurate with rapidly expanding use of its service on mobile devices.
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Labels and performing artists are seeing good growth from digital performance royalties these days. But could they do better? SoundExchange, the performance rights organization for non-interactive digital music services like Pandora and SiriusXM, paid out $95.8 million in digital performance royalties to recording artist and record labels in the second quarter of 2012.
Payouts of $204.4 million for the first half of 2012 put SoundExchange on track to easily top 2011's disbursements of $249 million. But the second-quarter payout was a noticeable drop from the $108.6 million the organization paid out in the first quarter. That record total, the only that has topped $100 million in a single quarter, was attributed to "data cleanup and technology overhaul efforts."
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