Another musical British invasion – Spotify – finally has hit the United States, and Pandora (NYSE: P) is taking notice. So far, the noise has been intense, kind of like a Metallica concert. Even celebrities like Britney Spears and Ashton Kutcher have been sending out some nice Tweets about the service.
The mastermind of Spotify is Sean Parker. Just in his early 30s, he has helped to create companies like Plaxo, Causes, Napster and Facebook (Justin Timberlake played him in “The Social Network”).
Spotify is a music streaming service that has more than 15 million tracks to choose from. You can use it on your PC, Mac and smartphone.
So what makes Spotify interesting? Essentially, it has added social features. Namely, you can share music tracks and playlists with your friends, such as on Twitter and Facebook. According to a blog post from Parker: “By enabling social discovery of music, Spotify will forever change the way music is discovered, consumed, marketed, and monetized.”
While this does seem a bit over the top, the Facebook tie-in is likely to be a nice boost. Just look at the success of Zynga, which has built a $20 billion company on Facebook’s 750 million user base.
Thus, if Spotify can get some Facebook mojo – and perhaps even strike a partnership with the company – the impact could be terrible for its rivals. Pandora, which recently became public, looks particularly vulnerable. True, the company has been growing quickly and has reached a user base of 100 million. But it has yet to make a profit and pays almost half its revenues to the recording industry and license holders. As a result, there might not be any net income for a couple more years.
What’s more, Pandora must also face another worthy competitor: Clear Channel. The radio giant hired Bob Pittman, who is the founder of MTV and a key figure in AOL’s growth in the 1990s. He is pushing the iheartradio service, which is getting lots of traction.
It could prove highly disruptive, as Clear Channel can provide iheartradio for free because it can rely on the cash flows from its core radio business.
In the end, the beneficiaries are the consumers, who will have many choices at affordable rates. But Pandora shareholders might be singing a different tune.
Tom Taulli’s latest book is “All About Short Selling” and he has an upcoming book called “All About Commodities.” You can find him at Twitter account @ttaulli. He does not own a position in any of the stocks named here.
