People are saying Pandora just dodged a huge bullet in the Apple Music launch

Pandora is the biggest, best mobile music streaming app that no one ever talks about. And yesterday, it looked as if maybe Pandora might get crushed by the launch of Apple Music, the new iPhone streaming app that is likely to be huge as iPhone users switch from iTunes to the new product.

Apple wants to get 100 million subscribers for Apple Music. Pandora has just 80 million monthly users, after years in business. But it has nearly $US1 billion in annual revenues — which Apple would surely like to steal.

However, a scan of what smart people are saying about Apple Music and the way it might affect competing music streaming companies shows that Pandora might just have dodged a bullet. (Investors are taking a different view today — the stock is down 4% in early trading.)

Because Apple Music only offers a paid subscription, and because Pandora is mostly used as a free streaming app, it looks like the two services won’t compete. This, of course, assumes that that people who like free music now won’t suddenly develop an urge to start paying for it in the future.

In addition, the initial reactions to Apple Music are not great. Here are some highlights from tech writers, who are usually positive about Apple. Note that they all felt Apple Music sounded confusing, because it is trying to do three things in one (stream music, play your collection, and let you interact with artists):

Ben Thompson, Stratechery: … there is this (streaming music) and that (curated lists) and this (BeatsOne radio) and that (Ping Connect) and no cogent thread to tie them together beyond the assumption that Apple must do a music service because that is what they do. That’s what big companies do.

Neil Cybart, Above Avalon: The one thing that still is giving me pause from declaring Apple Music a home run is price. I still have concerns that by not having a free streaming tier, Apple may have trouble competing with YouTube and other places where people don’t pay for music.

Dave Smith, Business Insider: But there were so many features, and very little of it felt cohesive. When you click on any given song, for instance, you get nine different options, including the ability to store the song offline, create a radio station from that song, play that song next, and more. It looked very cluttered and not very intuitive, at least not from an audience’s perspective.

Pandora, by contrast basically does one thing: Stream music for free. You can pay it to get rid of the ads, but that’s about it.

Now look at what City and Wall Street analysts are saying this morning. Sure, they can see how a big new music product from Apple isn’t a great thing for Pandora, but surprisingly they aren’t predicting a huge impact on the smaller company:

Ignatius Njoku et al at JMP Securities: … we believe Apple Music is a competitive threat to Pandora’s ad-free music service, namely Pandora One, where subscribers pay $US3.99 per month to listen to ad- free radio. While we do not expect a significant migration of Pandora users to Apple Music, we believe Apple’s new consolidated music offering of streaming radio, on- demand streaming tracks and iTunes music download could draw users away from Pandora’s ad-supported online radio service over time. We note Pandora has faced a similar competitive threat from Apple in the past with the launch of iTunes Radio in September 2013, which led to Pandora’s October active users declining 2.5% month/ month, but active users grew 5.4% month/month in November, suggesting Pandora withstood the impact of iTunes Radio.

Peter Stabler et al of Wells Fargo: Impact on Pandora? We don’t expect much. We would never discount the power and market reach of a company like Apple and believe the Apple Music debut will likely drive significant product sampling, just as the introduction of iTunes radio apparently did. That said we believe Apple’s primary goal with this product re-formulation is to derail the growth of Spotify–a company we believe is likely having a larger impact on digital music download trends than Pandora’s lean-back streaming radio product. Beats 1 is an interesting new entry, but we don’t believe a “one size fits all” global radio station is likely to see adoption momentum large enough to convince Pandora users to switch. Put another way, if iTunes radio (as a free, ad supported offering) failed to dent Pandora’s momentum, we believe there’s little here to change the equation from a free-to-user product standpoint.

Benjamin Swinburne, et al of Morgan Stanley: Somewhat mixed read-across for Pandora: Surprisingly, Apple did not announce any major new or expanded free services (and in fact appears to have ended iTunes Radio), we believe leaving space in the ecosystem for Pandora to serve the free/ad-supported market. Additionally, Apple Music’s $US10 price point was not disruptive, though the $US15 family plan (up to 6 users) does appear somewhat more compelling. … The apparent strong pressure from the labels to drive paid subscription over free remains a key risk for Pandora, in our view, which must rely on statutory rights and therefore put its business model to a large degree in the hands of the Copyright Royalty Board.

Geekwire produced a handy chart that shows why Apple Music might bypass Pandora in its attempt to kill Spotify (analysts are pretty unanimous that Apple Music and Spotify will compete head on). Basically, Pandora occupies the lowest possible price rung in streaming. It’s free (for most users) but even if you want to pay it only costs $US5.

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