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Pandora Media (NYSE: P ) is flying high in the streaming music category these days, with more than 200 million registered users. Its stock even climbed to a new 52-week high yesterday.
However, a new announcement this week from Google (NASDAQ: GOOGL ) could threaten Pandora's dominance. That's because the search giant is expected to unveil a paid-subscription music service today. Let's look at what this means for other companies in the space and whether Google can make it in the music business.
Tuning in to a crowded market
Streaming music services are red-hot these days. From Pandora and Spotify to Microsoft's (NASDAQ: MSFT ) Xbox Music, there's no shortage of competition in the streaming market. So why does every company with deep pockets want a piece of the action? The answer: mobile ad revenue. With a Google streaming service now in the mix, Spotify and Pandora may have to fight even harder for ad dollars.
However, this should be less of a problem for Pandora. Let me explain. Unlike Spotify or Xbox Music, the majority of Pandora's listeners use the free ad-supported version of Pandora. While we don't yet know what Google will charge for its subscription music service, we do know that it will entail a paid subscription.
For this reason, I think Google is targeting a different group of listeners than those actively on Pandora. Sure, for just $3.99 a month, Pandora users can listen to music ad-free. However, this group doesn't make up the bulk of the company's subscriber base. I think Pandora is safe, at least until Google gives us more insight into its possible music offering.
That being said, Google has reportedly locked down deals with two key record labels including Universal Music Group and Sony Music Entertainment. This could put added pressure on Apple (NASDAQ: AAPL ) . Earlier this year, the iTunes company allegedly ran into setbacks with its so-called iRadio platform after talks with various music labels fell through.
Even if Google's new service isn't a direct threat to Pandora, it will certainly shake things up in the already-crowded streaming space. For now, most investors can agree that it's good to be a Google shareholder.
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