Why Pandora Media Plunged

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What: Shares of Pandora Media (NYSE: P  ) have plunged today by as much as 21% today after The Wall Street Journal reported that Apple (Nasdaq: AAPL  ) may be preparing to launch a directly competing service.

So what: No one likes competing with Apple because the company has a knack for mercilessly disrupting markets and leaving countless casualties in its wake. The report says Apple is in licensing negotiations with record labels to offer a music streaming service that could be delivered through its widely installed base of iDevices and Macs, which have helped contribute to Pandora's soaring usage in recent years.

Now what: Apple could reportedly serve up ads through its own iAd platform, while negotiating favorable licensing terms that would differ from Pandora's. The iPhone maker's service would reportedly be more interactive than Pandora's. While music sales aren't a core business for Apple, using Pandora's free service does dissuade consumers from purchasing music on iTunes, which could be why Apple is interested in launching a competing service.

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Fool contributor Evan Niu owns shares of Apple, but he holds no other position in any company mentioned. Click here to see his holdings and a short bio. The Motley Fool owns shares of Apple. Motley Fool newsletter services have recommended buying shares of Apple. Motley Fool newsletter services have recommended creating a bull call spread position in Apple. The Motley Fool has a disclosure policy.
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