Why Pandora Shares Fell 7% Today

Shares of Pandora  (NYSE: P  ) were under heavy pressure today, losing 7% after rival Spotify announced a new free mobile music service geared toward smartphones and tablets. To date, Spotify has included mobile access as part of its premium service, but is changing its strategy. Tablets will get the same treatment as desktop, with on-demand access to Spotify's extensive library. On smartphones, users can pick an artist or playlist and listen in Shuffle mode. Naturally, these free services will be ad-supported, much like Pandora.

Pandora has held up well against the threat of Apple and Google, and shares recently tapped all-time highs in November. Spotify is more of a direct competitor, though, as music streaming is also its core business. Spotify remains much smaller in terms of users with 20 million active users. Pandora was boasting more than 72 million active users in November. With Pandora recently reaching new highs, investors are proceeding with caution.

In this segment of Tech Teardown, Erin Kennedy discusses Spotify's new mobile app with Evan Niu, CFA, our tech and telecom bureau chief.

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