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A Few Reasons Why Pandora Is Best Avoided

August 26, 2014 | About:

The quantity of companies that offer a music subscription or web radio service seems to be developing consistently. There's Pandora (NYSE:P), which has turned out to be extraordinarily prominent with its free promotion-supported model and a notice-free subscription service. At that point there's Spotify, which has a much bigger library than Pandora; furthermore, it offers a free commercial-supported version. Pandora has around three times as numerous dynamic users as Spotify does.

Google in focus

This effectively packed space got another contender as of late as Google propelled the All Access music service. This is like Spotify, where users are charged $10 per month to have the capacity to stream a boundless number of songs. Yet Google introduces some special features, in the same way as the capacity to consolidate your personal music library with the streaming index. The service also has a radio peculiarity similar to Pandora's, where playlists are consequently produced.

The profit that Google has is its, as of now, vast and ubiquitous ecosystem of products and services. With Android being the prevailing OS in the mobile space, incorporating the new music service into Google Play gives the service a huge point of interest over the opposition.

The issue with online music

Any business model that requires payment of royalties to substance owners so as to serve that substance is not an extremely alluring one. An enormous bit of the revenue which these companies produce is spent on royalties, and that reality is unrealistic to change at any time soon. This means that profits, in the event that they exist whatsoever, will necessarily be small.

Pandora and Spotify pay royalties in diverse ways. While Spotify negotiates straightforwardly with the substance owners, Pandora pays a sovereignty rate which is controlled by the central government. Hence, each time Pandora plays a song, it needs to pay a penny in royalties. This is why the organization has a limit of 40 hours per month on its free service.

Pandora's struggles

Most of Pandora's revenue comes from selling advertisements, yet thus far costs have come just as fast as revenue. This is a crucial issue with the business model that won't go away unless government laws are improved.

Purchasing Pandora stock essentially boils down to a bet on the actions of the national government with respect to sovereignty rates. You're paying $2.8 billion for an organization that is not profitable and will probably never be profitable unless laws are changed. What's more regardless of the possibility that eminence rates descend Pandora faces an onslaught of rivalry. Pandora just has around 900,000 songs in its library contrasted with Spotify's 20 million, putting it at a significant disadvantage.

Shouldn't something be said about Apple?

For a long time, Apple (AAPL) has been supposed to be taking a shot at a music-streaming service. Apple's itunes remains famous, with the service passing the 25 billion songs check in February. In any case with Google propelling a service it's conceivably just a matter of time before Apple joins the conflict. As of late rumors have developed suggesting that Apple is close to a concurrence with Universal Music Group, the largest of the real record companies, on a streaming arrangement.


Pandora is in a bad position. Not just is its present business model not able to turn a profit, rivalry from Google and likely Apple alongside the current rivalry from companies like Spotify puts Pandora's future in peril. Investing in Pandora is almost unquestionably an enormous mistake.

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