Pandora Shares Fall on Heels of Spotify Launch

By Beecher Tuttle July 14, 2011

Pandora Media shares took a fairly sharp hit on Thursday , following the U.S. launch of popular European music subscription service Spotify.

Shares of the newly-public company fell a full 6 percent after the news broke, leaving the stock price floating just under $17 as of mid-day. Pandora shares have been on a mini rollercoaster since the digital music service company went public in June at $16 per share.

Although Spotify will be a competitor to Pandora, the two services are actually quite different. Spotify offers users both ad-supported free listening – similar to Pandora – and an all-you-can-eat $5 per month subscription service that cuts out the ads. Both of these options are for computers only.

Users who want to take Spotify's catalog on-the-go can sign up for a $10 per month service that works on the majority of mobile devices. To date, Spotify has attracted around 1.6 million paying customers, according to the AP. The service currently has more than 10 million registered users.

"The key is to get them invested in the experience," Ken Parks, chief content officer and managing director of Spotify North America, told the news source. "You spend 1,000 hours in an experience like Spotify building playlists, it sort of becomes part of your life."

The biggest similarity between Spotify and Pandora is that neither company has been able to turn a profit. Since it opened its doors 11 years ago, Pandora has lost a total of $92 million, including $1.8 million in fiscal year 2011. The American company's $16 per share IPO price gave it a market value of around $2.6 billion, which is 19 times more than its revenue totals from last year.

Spotify has had even more trouble breaking even. The European music service reportedly lost $26.7 million in 2009, forcing the company to add more limits to the free listening time that it offered users. The hope was that the move would encourage more members to sign-up for the pay service

Want to learn more about the latest in communications and technology? Then be sure to attend ITEXPO West 2011, taking place Sept. 13-15, 2011, in Austin, Texas. ITEXPO offers an educational program to help corporate decision makers select the right IP-based voice, video, fax and unified communications solutions to improve their operations. It's also where service providers learn how to profitably roll out the services their subscribers are clamoring for – and where resellers can learn about new growth opportunities. To register, click here.

Beecher Tuttle is a TechZone360 contributor. He has extensive experience writing and editing for print publications and online news websites. He has specialized in a variety of industries, including health care technology, politics and education. To read more of his articles, please visit his columnist page.

Edited by Jamie Epstein

TechZone360 Contributor

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