January 16, 2013
In the following video, Jeremy Bowman and Isaac Pino discuss investment risks associated with Internet radio provider Pandora. The company is a high-risk, high-reward investment, and Jeremy believes investors need to be aware of two major pitfalls.
First, competition is growing. While Sirius XM Radio and Spotify are the most obvious competitors, Apple has indicated its intention to enter the Internet radio market. The industry is changing fast, and Pandora's competitors are not sitting still.
Second, Pandora's revenue has struggled. Pandora relies on advertising rather than subscription fees, and this has not proved as profitable as originally hoped. The company hasn't really carved out a space for itself and is laboring to grow as the market matures. Further, content costs, particularly royalties, are eating into revenues. Pandora is thus left with the choice to either increase advertising space and risk alienating listeners, or find other revenue streams.
Pandora has won millions of devotees among music fans but few supporters on Wall Street. The online jukebox has put up dramatic growth numbers in its listenership and seems to be redefining the way we consume music, a transformation that's only likely to grow. But high royalty rates and competition from all corners threatens to silence this upstart before it ever grabs the microphone. Can Pandora translate success with its listeners into a prosperous business model that will deliver for investors? Learn about the key opportunities and potential pitfalls facing the upstart radio streamer in The Motley Fool's new premium research report. Not only will you get the kind of insight normally found from high-priced Wall Street brokerages, but you'll also receive a year's worth of free updates. All you have to do is click here now to activate your subscription to this invaluable investor's resource.