Shareholder confidence is an interesting phenomenon to watch. The stock market doesn’t care that Apple makes more money than most developed nations or dominates markets and mindshare. Shareholders in a company want to see growth in the company’s stock price, usually equated by fast growth, rather than profitability. Apple doesn’t work that way, hence the deflowered AAPL price.
You know what else isn’t growing like it used to? The streaming music business. Well, at least parts of it are not growing since Apple introduced Apple Music to take on Spotify, Pandora, and other streaming music services. Looks like we have another victim in the making.
‘How Much Do You Want?’
Word on the streets is that Pandora’s major shareholders have had enough of the falling stock price syndrome and they’re actively shopping Pandora to anyone with plenty of money and willing to to pay more than a failing company is worth.
A few years ago Pandora was worth upwards of $7-billion. Now it’s worth less than $2-billion. Sure, the stock market is in a ditch right now, but that’s only adding to Pandora’s woes. Pandora’s stock price began to fade about the same time as Apple bought Beats Music which started the rumor that an Apple streaming music service was on the way.
It seems to me that Pandora’s investors are not all that smart because two years ago would have been a good time to ditch their shares and sell the company, not a couple of years later when the stock price has hit toilet and fire sale levels (Monday is mixed metaphor day at Mac360).
Investing in a company is a risky business. Pandora was a good idea; streaming music subscriptions and advertising, and way back in the days of the startup there wasn’t much competition. Today competition is everywhere and the business model for streaming music has yet to make anyone much money, so Pandora’s investors see the handwriting on the wall and they’re ready to unload stock and move out of town.
Two words: Apple Music.
Apple has so much money, such a large music library, that it could afford to give away free streaming music for the next 10 years, which would drive everyone else out of the streaming music business, and you’d still be hard pressed to find the losses on the company’s balance sheet.
Pandora Radio is the largest and one of the oldest online streaming music services, dating back to the turn of the century, but the company’s 15-minutes of fame has come and gone. Spotify is something of a competitor and it has nearly 80-million users and about 20-million paying subscribers. It took the company eight years to reach that number, while Apple Music is about halfway there in barely a year, so, again, there is handwriting on the wall folks.
The streaming music business doesn’t seem to do much for anyone except listeners who have access to tens of millions of songs for a nominal monthly subscription rate. Artists don’t make much. The streaming business doesn’t make much. So, investors have figured out what any third grader could tell you about a failing business model.
Flee. Stop doing that. Or, in the case of investors who have already invested and may not get a return on their money, sell out, then flee.
That’s what’s going on with Pandora. And you can blame Apple Music for the demise.