Pandora's Moving Forward with Toyota

Pandora Media (NYSE: P) wants to take you out for a test drive.

The personalized radio service operator announced today that Toyota (NYSE: TM) is offering an embedded version of Pandora on the 2012 Camry and 2012 Tacoma vehicles that are just starting to hit showrooms.

We've known that Pandora was going to be part of Toyota's Entune platform since January, but now we're seeing that it's available in the country's best-selling car and the top-selling compact pickup truck.

Ford (NYSE: F) has offered voice-activated access to Pandora through its SYNC AppLink platform for some time, but Toyota's making it even easier.

As long as someone in the car has a smartphone -- and the Entune app currently supports iPhone, BlackBerry, and Android -- the handset's data plan can be used to stream Pandora through the car's audio system.

Entune is slicker than you probably think. The car's center console lights up with big app buttons for Microsoft's (Nasdaq: MSFT) Bing for search and directions, OpenTable (Nasdaq: OPEN) for dining reservations, MovieTickets.com for multiplex tickets, and streaming access to Pandora and iHeartRadio.

If Sirius XM Radio (Nasdaq: SIRI) isn't trembling with fear it's because the satellite radio giant has been striking market-widening deals of its own. Sirius XM announced a new deal with Nissan and Infiniti this morning, offering three months of access for pre-owned cars sold by the dealers with existing receivers.

Sirius XM also offers dealerships financial incentives that Pandora will not be able to match.

However, Toyota knows that it can't ignore Pandora's appeal when it comes to selling new cars. Pandora's revenue soared 117% in its latest quarter, as the music-discovery site served up 1.8 billion listener hours. Pandora's explosive popularity -- and the ubiquitous nature of the top three smartphone platforms -- make it easy to offer drivers a growing array of free options on the wireless carriers' bandwidth.

If Toyota misses out on a few XM subscriber activations because drivers upgraded their old cars to new Camry and Tacoma vehicles with Entune it's a trade it will gladly make.

The next few months will be crucial. Is Entune the seamless platform to beat? Is it buggy? The ability to use the car's radio dashboard to select Pandora stations, skip songs, and rate songs to get even better recommendations is something that terrestrial and satellite radio operators can't ignore.

If you want to see how the premium and streaming radio wars play out, consider tracking SIRIUS XM Radio and Pandora Media through My Watchlist.