AOL Partners With Slacker: Did Pandora Miss Out?

Includes: AOL, P
by: Spencer Osborne

America Online (NYSE:AOL) has once again made a new deal for its AOL Music brand. This time the, online service is partnering with internet radio provider Slacker to provide music options to AOL users. Slacker, a direct competitor to Pandora (NYSE:P), offers tiered music services that offer a free ad supported model, a subscription tier for $4.99 per month, and an on-demand tier for $10 per month.

Did Pandora somehow drop the ball here? After all, Pandora can be found everywhere, including refrigerators. It is interesting that privately held Slacker was able to make such a major deal even with Pandora going public and seeking out any way possible to make their business profitable.

AOL Music boasts over 3 million unique visitors per month, and now those users will get to try out Slacker as a possible Internet radio provider. This move gives Slacker a boost in their efforts to catch up with the huge numbers Pandora already has.

Pandora has grown substantially over the last two years with the advent of smartphones. In the opinion of many, including myself, it is the smartphone and its integration into auto dashboards that will propel Internet radio into a much brighter future. The problem is that the automobile integration will take time to pan out, and losing a deal with AOL is a missed opportunity for a company that is in a much brighter spotlight since going public.

While losing out to Slacker on the AOL deal will not kill Pandora, it is big enough that investors and the Street will ask questions. For Pandora, hitting on all cylinders is important, and only a few weeks after its IPO, it seems to have had a misfire. It let its smaller and younger competitor get its foot in the door.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.