Shares of Pandora (P) moved higher -- and Sirius XM Radio (SIRI -1.59%) moved lower -- on Monday afternoon in the aftermath of Apple's (AAPL -0.81%) presentation to kick off its annual WWDC event for developers.
Why did Pandora move higher? Apple's long-anticipated iTunes Radio service was finally unveiled, and while the model is probably too close for comfort to Pandora's pioneering music discovery platform, at least now there are no more uncertainties. Pandora knows what it's up against, and there's a certain level of relief with that.
Why did Sirius XM move lower? The iTunes Radio service -- where consumers can create Pandora-like stations -- isn't all that different than the assault that satellite radio has been able to contend with in the past through Pandora and lesser rivals. However, it was Apple's push for iOS in cars that spooked investors.
Apple announced that Honda, Mercedes, Nissan, Ferrari, and Infiniti will be integrating more iOS features in their cars by as early as next year.
Now, Sirius XM is no stranger to the connected car. It has surprisingly worked in Sirius XM's favor. CFO David Frear revealed earlier this year that drivers of cars with smartphone-tethered vehicles convert at a higher rate than those who don't. Most of the newer cars on the market already make it easy for a smartphone owner to use USB ports or Bluetooth to play tunes and podcasts through iTunes or stream popular apps.
However, it's just worth the hassle for many smartphone novices. That may change next year as car LCDs provide phone, text messages, and other functions. A photo during the presentation revealed dashboard icons on a screen for phone calls, messaging, mapping, and music. The fear -- one would assume -- is that there are now many Trojan horses here to disrupt Sirius XM's model. Whether someone wants hands-free phone conversations or free navigation, there will be so many reasons to get up to speed with in-car iOS functionality that it will become that much easier to stop paying $14.49 a month for Sirius XM with so many cheaper options.
Apple isn't afraid to sell itself cheap with iTunes Radio. In a surprising move, Apple will offer it for free as an ad-supported model. An ad-free version is included for those paying $24.99 a year for iTunes Match, which effectively makes it cheaper than Pandora's ad-slashing Pandora One subscription that costs $36 a year.
Pandora and Sirius XM shareholders can take heart in knowing that Apple has been surprisingly mortal in recent years on the digital music front. It was slow to jump into the streaming market. Apple also flopped with its Ping social music network and has failed to gain serious traction with iTunes Match.
Things may change if more cars begin pushing iOS integration -- making it harder for Pandora and Sirius XM to keep growing -- but until Apple proves that it can succeed in a niche that is has neglected for years, it's hard to bet against either company.
