Pandora stocks tank on rumors of Apple streaming service

The rumor mill is starting to heat up with stories that Apple is planning to launch an iTunes-based streaming service to take on Pandora and Spotify, and it’s already struck a major blow against Pandora, whose stock dropped by 17% today. The streaming scene could be about to get even more interesting.

Some investors have been skeptical about Pandora’s prospects ever since it went public last year, and Spotify’s entry to the North American market only reinforced those concerns. If Apple really is planning to burst into the crowded market, they’ve got even more reason to be skittish. The fact that the Wall Street Journal says that an Apple streaming service would look more like Pandora than Spotify doesn’t really help things.

Apple has apparently been negotiating with record labels to launch its service, although it’s not this first time they’ve considered diving into the market. Rumors like this have been cropping up for a while now, but apparently it’s different this time. It makes perfect sense that they’d want to get into the market, lest it catch them by surprise. By leveraging their popular mobile platforms and huge head start in the music business, Apple might well be able to craft a powerful competitor to established streaming businesses.

"They are the biggest threat out there," Capstone Investments’ Rory Maher told Reuters. “They have quite a bit of leverage through iTunes.” And while that’s definitely got some analysts and shareholders worried, others see light at the end of the tunnel: “Why wouldn’t Apple want to leverage Pandora’s ad business?” Albert Fried and Co’s Rich Tullo asked. “Pandora is a great content acquisition.”

For all we know, Apple could’ve already approached Pandora about making that a reality. Or they could be totally unenthusiastic about that prospect. Regardless, if Apple does enter the market, Pandora is going to find itself in an even tougher position than where it’s at right now.

As Apple consolidates the services that surround its iOS platform, competitors (even if they have previously had a close relationship with Apple, like Pandora and Google) are bound to start to feel a squeeze. After all, why should customers bother with third party apps when Apple offers everything they need?

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