Since their business model is to stream relevant music to their listeners, Pandora employees should be hearing the “JAWS” theme in their headphones right about now. According to the sort of whispered speculation that now precedes any major event, Apple is looking to enter the streaming music business.
Though Apple hasn’t released any formal notice, and most likely won’t at their big press conference on Sept. 12, media insiders are already debating what this could mean for the likes of Pandora and Spotify. If the stock market is any indication (and it usually is), Pandora is in for a bumpy ride — their stocks dropped 19% just based on the Apple gossip. It is an alarming downward trend for a company that still hasn’t figured out a way to become profitable.
Still, “Downtown” Josh Brown, a blogger working the Wall Street beat, is optimistic about Pandora’s chances with the big fish circling around. Via a video post on his blog, he mentions that Apple’s interest provides proof that Pandora is at least operating in a sustainable market — essentially, that Pandora and Spotify are doing something right. The big problem with the streaming music market is that the amount of royalties paid to the music labels currently outweighs the ad revenue the companies are securing. And this is where Apple’s clout comes in handy: sources say the music and tech giant is currently negotiating with record labels for lower across-the-board royalty percentages paid on online music.
Apple would most likely place their streaming music operation under the umbrella of iTunes as a replacement for their “Genius” application, which in the court of public opinion hasn’t exactly passed the smell test. “Genius” was originally installed in iTunes largely as an attempt to combat the popularity of the Music Genome Project, a precursor to Pandora that was co-helmed by Tim Westergren, Pandora’s founder. Attempts to contact Tim for comment have not been returned.
Apparently, Apple has no interest in going the simple route, which is to buy Pandora. Apple, which could easily absorb the much smaller music company, has a long-standing tradition of developing the technology in-house and then trotting it out to compete for absolute supremacy. Steve Jobs would’ve wanted it that way.