Google Inc (NASDAQ:GOOG), (NASDAQ:GOOGL) stole Apple Inc. (NASDAQ:AAPL) thunder this week after launching a free music streaming service ahead of the launch of Apple Music. Tim Cook and his team won’t be worried about the anemic ad-supported offering from Mountain View, but Pandora Media Inc (NYSE:P) traders can see the writing on the wall.
In the last five days shares in the firm have lost more than 5% of their value. The struggling web radio firm is being hit from all sides by better-financed rivals with more ways to promote and sell their services, and it’s Pandora that will really hurt from the launch of Google Play Music.
Google pushes free streaming
The Google Play Music media streaming service won’t let users pick what song they want to listen to. Instead they’ll have to listen to curated playlists that suit their mood and the genre they’re looking for. The playlist will be dotted with ads that will let Google pay for the service.
It’s clear to those with info on Apple Music that the Google service won’t compete in terms of features. Google already offers a paid music service. That hasn’t exactly changed the world, however, and it’s unlikely to pick up simply because of the new ad-lined version.
Elias Roman, product manager at Google Play Music told The Verge that the new music service will just work for users. He told the site, “They want the music to be awesome. They want it to be contextually relevant, but they don’t want to tweak a lot of knobs.”
That means that Google expects its free Play Music service to give users what they want without them needing to do much to pick what they’re looking for. That’s a big ask, even from AI as advanced as that working for Google right now.
Google isn’t betting heavily on its new music service, though the firm will use it as a way to earn extra ad revenue and collect more data about users of the service. If Google can figure out what kind of music you like, it will be able to sell it to you better in future. That’s the kind of logic that pervades most of the firm’s choices, and it’s at the heart of the new streaming service.
MIDiA Research analyst Mark Mulligan says that Google is a minor player in the music streaming space. He says, however that “Free is what Google does best — they know how to build user engagement around free and monetize it with advertising better than anyone else.”
Apple doesn’t care all that much about third part ads, and the firm’s Apple Music streaming service may be hurt by that, but it won’t be crushed by the Google entry into free, curated playlists. At a price of zero for each, the Apple Music free trial is a much more compelling product.
Pandora gets crushed
Pandora, however, may be crushed by the arrival of the big firms into the music space. Competition and high costs have already erased a large part of the firm’s value in the last twelve months, and there appears to be little way out for it as Apple and Google take to streaming.
After the launch of Apple Music, Axiom Capital’s Victor Anthony worried that Pandora’s future was in doubt. He advised clients to Hold shares, and raised his price target from $17 to $18. Shares in the music firm have lost 40% in the last year, and closed at $16.33 on June 24, down from close to $29 a year ago.
“Whether all the bells and whistles that come with the new Apple offering are enough to sway usage away from Spotify, Pandora, SiriusXM and many others in an already crowded field, or whether Apple opens up the category, remains to be seen,” he wrote in his report on the changing media streaming landscape.
A free version of Google Play Music may not have much of an effect on Apple Music, but Pandora traders are running scared. Shares already hard hit by the rise of Spotify have been hit again by the rise of big streaming from Apple and now from Google.
Each user lost means something big to Pandora, though Google and Apple traders won’t even notice the music streaming sales in among the real heavyweights in their earnings reports. There is little enough for Apple and Google to win in the music space, while Pandora has a lot to lose.