Apple, Once Pandora's Savior, Could Silence It

The tech giant may start its own streaming-music service.

By SHARE
FE_DA_PandoraApp_061711.jpg

How quickly your friends can turn on you.

[Check out our gallery of our political cartoons.]

Pandora, the popular steaming-radio service, may be on the verge of getting an imposing new competitor: Apple. The technology giant is reportedly developing plans to launch its own streaming-music service within the next year, an extension of its ubiquitous iTunes music store.

It's a small development for Apple but a huge one for Pandora, which is still a fragile upstart trying to secure a foothold in an ever-shifting technology landscape. Pandora's stock fell about 15 percent on the news, with some analysts fearing the company might succumb entirely if such a huge rival enters the field.

The irony is that just a few years ago Apple unwittingly saved Pandora, helping raise it from a little-known startup to a leader in its field. Back in 2008, Pandora was one of several new online music services fighting for music lovers' attention. It had a dedicated band of followers but little name recognition. Then Pandora launched an app for the iPhone, almost on a whim. To the company's surprise, thousands of new customers started signing up every day.

[See why stocks are rising for the wrong reasons.]

"The iPhone changed everything for us," Pandora founder Tim Westergren told me when I interviewed him for my book Rebounders: How Winners Pivot From Setback To Success. "It almost doubled our growth rate overnight. More importantly, it changed way people think of Pandora, from a computer service to a mobile service."

When Apple introduced the iPad in 2010, it further enhanced Pandora's offerings, allowing it to do things like highlight the art from album covers and provide detailed information on each band it featured. When I interviewed Westergren in 2010, he rhapsodized over the serendipity. "Apple is extraordinary," he told me. "It redefined our entire industry."

Apple may now redefine it again, the same way its products are transforming businesses such as news, publishing and broadcasting. And as other tech firms have learned, Apple can be a finicky friend. It has featured Google Maps on the iPad since the device debuted, for instance, but Apple now plans to build its own map database and use those instead. Apple's antipathy toward Google over Android mobile phone features, allegedly copied from the iPhone, probably contributed to that decision.

Pandora hasn't wronged Apple in any obvious way, but it has developed an innovative business model that draws competitors. In that way, Pandora may end up a victim of its own success. Pandora still has a lot going for it, such as deals with automakers, including Ford and Honda, to install Pandora as a built-in app in vehicles. It also has a vast database of songs broken down by more than 400 musical attributes, which is how it helps listeners find new music they may like, and haven't heard before. It would take Apple a while to build something similar, without simply pirating Pandora's technology.

[See why the social-media bubble is starting to burst.]

But Pandora doesn't have its own iPhone or iPad, and if Apple decides that its own music service should be the preferred choice on its devices, Pandora could end up singing the blues. When Apple takes the stage, it's usually as the headliner, not the opening act.

Rick Newman is the author of Rebounders: How Winners Pivot From Setback To Success. Follow him on Twitter: @rickjnewman.