Music Business Journal: Apple Plans for Internet Radio
When Pandora internet radio entered the market with a strong initial public offering in 2011, a reporter from Bloomberg TV asked the chairman and CEO, Joseph Kennedy, about how his company compared to Apple. He said that, out of all the people who listen to music, eighty percent listen in a radio format in which someone else plays DJ. “We’ve focused on that eighty percent,” said Kennedy, “Apple and others do a great job with the twenty percent where you’re playing your own DJ.”1 Now it seems that Apple is preparing to move into the broadcasting space to expand their twenty percent. The Wall Street Journal and the New York Times issued the first reports in early September that Apple was in talks to create its own version of Internet radio.
The news sunk Pandora’s stock and spawned rumors about a potential buyout. Moreover, several questions derived from the announcement. Could Pandora compete against Apple? Would Google, Amazon or Clear Channel purchase Pandora in order to stay in the race? Would Apple buy it? Even if Apple chooses to build rather than buy, Pandora still seems like a viable target for Apple’s competitors. Given its rapid growth rate, the Internet radio company is arguably a cheap buy at the moment, at 1.7 billion U.S. dollars.2 With a better revenue model, or perhaps if it can get a break on royalty fees, Pandora is showing potential to be a smart investment.