Streaming music is all the rage lately. Just ask Apple (AAPL 0.49%). The tech giant has its 2015-launched Apple Music to thank for reversing its music business when download revenue was in decline.
But how's Pandora (P) holding up as competitors come to claim their share of this fast-growing opportunity? After all, Pandora was one of the first companies to bring streaming music to the masses in an intuitive (and legal) format. While Pandora's recent third-quarter earnings release certainly included some insightful details about the company's performance, investors may glean more useful information about management's longer-term strategies to remain competitive in Pandora's third-quarter earnings call.
Here are three must-see takeaways from the call.
Image source: Getty Images.
Will Pandora ostracize Pandora Plus subscribers?
Since Pandora launched its first ever on-demand streaming tier in March, one question some investors have had is whether management's focus on the new platform, called Pandora Premium, will take away from its more basic and less expensive Pandora Plus.
But Pandora CFO Naveen Chopra assured investors during Pandora's earnings call that this won't happen. After acknowledging the "meaningful number of listeners seeking interactive features" on its new Premium on-demand service, Chopra said Plus is still vital (via an S&P Global Market Intelligence transcript).
But at the same time, it is clear that there are many users who prefer to remain in an ad-supported tier or a lower-priced subscription. These users are also highly valuable to us, so we expect to continue our portfolio approach by enhancing features across all service tiers and by targeting our marketing to ensure we steer listeners to the stickiest tier in light of their personal usage habits.
Pandora Premium costs $9.99 a month and Pandora Plus, which is focused on streaming radio, costs $4.99 a month. Pandora's ad-supported service is free.
Pandora's competitive advantage
Speaking of the importance of Pandora's core radio features to its business, Pandora CEO Roger Lynch said the company thinks of its radio capabilities as its competitive advantage. To this end, Lynch assured investors that Pandora will continue innovating aggressively with radio.
I know and can see that competitors are trying to catch up to us or invest in areas of radio. I frankly don't think anyone comes close to creating the listening experience that Pandora does, because we invest a lot and frankly have invested a lot over many years, and have a huge dataset. ... So I always expect competitors to improve and to and try to catch us in this, but we're going to keep them in our rearview mirror on -- in terms of what we can do on radio features. I think that will continue to be a competitive advantage for a long time for us.
Pandora in a smart-speaker world
One thing three of Pandora's competitors -- Apple, Alphabet, and Amazon -- all have to go along with their streaming music services that Pandora doesn't is a smart speaker. This brings up several important questions: What's Pandora's strategy to stay ahead in streaming music when companies are boosting the value of their native services by prioritizing them on their own hardware? Further, how is Pandora faring in this evolving space?
HomePod. Image source: Apple.https://www.apple.com/newsroom/2017/06/homepod-reinvents-music-in-the-home/
When it comes to streaming music on smart speakers, Pandora is "seeing a lot of growth," Lynch said. And as far as how Pandora is positioning itself to succeed as tech giants launch smart speakers, Lynch said he believes the company's large audience and neutral position will ultimately sway most manufacturers to integrate its streaming services.
In what is likely a nudge to Apple's upcoming HomePod, which will reportedly only use voice-activated commands for its own streaming music service, Lynch said manufacturers that don't include Pandora are making a mistake. "[I]f you're coming out with a product that is fundamentally an audio product, and you're not embracing the largest digital audio service in the U.S., you're probably not serving your customers very well."
Lynch went on to say that though there may be smart speakers from manufacturers that refuse to work with Pandora, it won't be this way in the majority of cases.
So being in our own ecosystem, which is the 2,000 different devices that we're on, and leveraging our scale across listeners who use many different brands, I think we'll continue to have us featured in many of these devices.
Overall, Pandora's earnings call reinforced the company's plans to remain competitive as competition intensifies.
