P Stock: This is a Big Deal for Pandora Media, Inc.

Pandora StockRoyal Review Gives All Clear for Pandora Stock

Pandora Media, Inc. (NYSE:P) may have felt it won the lottery on Thursday after the Copyright Royalty Board made an extremely favorable ruling on royalties paid to musicians. P stock traded over 30 million shares by noon, surging nearly 15%.

While Pandora stock is exhibiting some gains, the stock remains well down from its $40.00 high in March 2014. Traders may be wondering if the royalty news is a game changer for Pandora. But my sense is while things are looking better, there will be many hurdles.

The copyright panel essentially has more clarity to the hotly contested issue of how much record labels should receive for their music to be on the airwaves.

Pandora Media Chart


Chart Courtesy of StockCharts.com

For streaming services like Pandora and Sirius XM Holdings Inc. (NASDAQ:SIRI) in 2016, these companies will pay record labels $0.17 for 100 plays if through a free streaming service and $0.25 for paid subscription services.

The big win for these streaming services relates to the years from 2017 to 2020 when the royalty is adjusted according to the consumer price inflation.

In my view, it’s a big win for Pandora and Sirius, but I don’t think it means there is easy money for stock market investors going forward.

Sirius XM Holdings Chart

Chart Courtesy of StockCharts.com

The Threats Facing Pandora

The reality is that the streaming and downloaded music market is extremely competitive. Nothing is guaranteed, but the next few years will likely crown a champion.

With Pandora, its success will be how to expand its current membership of about 80 million users. The company is anxious about aggressively expanding worldwide, specifically to the United Kingdom, if it pleases the regulators and record labels.

Sirius could become a bigger challenger for steaming music, although it is currently more linked with vehicle use. But I see great potential for home or mobile streaming.

Of course, Pandora also has to deal with the likes of Apple Inc. (NASDAQ:AAPL) and its  “Apple Music” platform—a streaming music service for all Apple devices and Android systems. AAPL is searching to diversify revenues away from its “iPhone.” And my belief is that there are tremendous opportunities for the company in streaming music.

Apple has a massive war chest of $200 billion and can easily grow this business. Apple could easily swallow up Pandora for $4.0 billion and Sirius for just over $21.0 billion if it wanted to.

And don’t forget upstart Sweden-based Spotify Ltd., which is taking the European streaming music business by storm and making its way to the United States.

And the Winner is…

So while it’s still unclear who the winner will be in a few years, the war could be a combination of small battles with the winner emerging in a few years.

I don’t know who will emerge victorious, but I would probably take a wager in Apple or Sirius to duke it out. The best thing for owners of P stock would be a takeover.

Stay in the loop. Follow George on Facebook and Twitter.