The Pandora Killer No One Saw Coming

Pandora (NYSE: P  ) knows its competition well.

The leading music streaming website -- serving up a monthly average of 1.1 billion hours of audio to its 54.9 million users -- knows that last year's stateside arrival of overseas favorite Spotify can't be ignored. Sirius XM Radio (Nasdaq: SIRI  ) may have half as many subscribers, but they are premium accounts that could warm up to the satellite radio giant's streaming Pandora-like offering rolling out later this year.

App stores are always brimming with flavors of the week. TuneIn Radio and Songza are just a couple of the free streaming applications perched high on lists of most downloaded apps.

However, did anyone really see Nokia (NYSE: NOK  ) coming?

Yes, Nokia.

The Finnish handset maker introduced a free music streaming service yesterday.

Nokia Music will be exclusive to Lumia smartphones. Lumia is the flagship line of phones powered by Microsoft's (Nasdaq: MSFT  ) Windows Phone mobile operating system.

There are currently 150 playlists, perpetually curated by musicologists. That's a shot at Sirius XM's commercial-free music channels. However, Nokia Music also has a "CREATE" function where playlists are generated from a library of millions of tracks inspired by artists that they love. That is the shot at Pandora.

Nokia Music is ad-free. There's no registration to fill out. Sure, you have to shell out big bucks to AT&T (NYSE: T  ) if you have the Lumia 900 or T-Mobile if you have the Lumia 710, but smartphone users streaming Pandora are probably doing that already.

Pandora's stock shrugged off the news; the shares closed higher yesterday. Yes, Nokia Lumia owners may be inclined to rely on Nokia Music as their top source for streaming instead of putting up with ads on the free version of Pandora, but the market apparently feels that this is too small a market to worry about.

We'll see. Nokia isn't the tastemaker that it used to be when the world was fine with old school feature phones, but what happens when Android and iPhone owners begin expecting similar perks? The two companies behind those platforms have pretty popular digital music platforms, you know.

Nokia may be a small player these days in smartphone features, but it may have raised the bar in a way that is harmful to Pandora's model.

Running of the bulls
I remain bullish on Sirius XM's future. It should come as no surprise that I'm promoting the CAPScall initiative for accountability by reiterating my bullish call on Sirius XM for Motley Fool CAPS.

I also just produced a premium report on Sirius XM Radio, detailing the challenges and opportunities that await investors that are both long and short the dynamic media giant. A year of updates is also included with the report. Check it out now.

The Motley Fool owns shares of Microsoft. Motley Fool newsletter services have recommended buying shares of Microsoft. Motley Fool newsletter services have also recommended creating a synthetic covered call position in Microsoft. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

Longtime Fool contributor Rick Munarriz calls them as he sees them. He does not own shares in any of the stocks in this story. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.


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  • Report this Comment On September 05, 2012, at 10:12 AM, rickornotrick wrote:

    Please. Nokia a killer? Wouldn't they need to sell more than say, 120 phones or so to be classified a killer? Nokia is as threatening as Richard Simmons in an MMA fight.

  • Report this Comment On September 05, 2012, at 10:38 AM, tbirdfan wrote:

    Just another poorly researched article claiming that Sirius is threatened by music only services.

    When will you get it people....Sirius is more than music....talk....sports.....instant channels to address current events......?

    Move on and get real about what almost 23 million people have and are paying for.....quality content that appeals to a wide variety of people, the people that are willing to pay for this quality and have the money to do so.

  • Report this Comment On September 05, 2012, at 12:03 PM, techy46 wrote:

    Nokia still sells over 70m mobile phones a quarter and the number of Windows Phones is increasing each quarter at a pretty good clip. I wouldn't be too smug if I were an Android or Apple fan boy.

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