Why Songza Is Not A Threat To Pandora, But Spotify Is

Jun.20.12 | About: Pandora Media (P)

Songza made its new app available in the iTunes app store and the service quickly saw its app download ranking explode. In fact, for a short period of time, the app was the most popular download. That number 1 ranking quickly faded away though.

There is always an appeal to something that is new and fresh. There will always be another company that can put a new spin on a current technology and make it "better." Apple (NASDAQ:AAPL) has been an expert at doing this successfully for years, so why can't someone else do the same?

In audio entertainment things are a little bit different. Certainly a company can launch a service with relative ease. The issue is whether or not a viable service can be launched. Part of being viable is consumer acceptance. Getting a top rated app can be a wonderful event. Keeping an app top rated is the challenge. It takes much more than writing lines of code to make an audio entertainment business viable.

The reason Songza is not a real threat to Pandora (NYSE:P) is simple. Pandora can imitate what Songza offers with ease, while Songza cannot easily do some of the non-program things Pandora has done. Songza is a fantastic concept, but that does not match the accomplishments of Pandora:

  • A presence with every major television maker to bring Pandora to the home theater systems
  • Over 50 million active users
  • A presence in over 50 car models including nearly every major manufacturer.
  • Brand recognition that is virtually unmatched by any other audio entertainment provider.

Where Pandora needs to worry is with services like Spotify. You see, while Pandora can do anything Songz can do, it cannot match up with the capabilities of Spotify. This is because Spotify has something Pandora does not ... direct deals with record labels.

Direct deals with record labels allows a company like Spotify to offer true on-demand music listening. This means that a subscriber can select any song they want to hear and listen to it instantly. Until recently it was an issue of self selection vs. curration. Now, Spotify offers Pandora like stations based on artists or songs. Should the company decide to, it can create mood based chanels as well just like Songza.

Essentially Songza is a great concept that will certainly garner some attention. In the end however, there is nothing that great about Songza that can uproot Pandora. Spotyify....That is a concern.

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