The war of the music streaming services is heating up, and Pandora is shaping up to be a big loser once the dust settles. Two days after Apple CEO Tim Cook announced that Apple Music has 6.5 million paid subscribers and 8.5 million users on a free three-month trial, Pandora revealed a loss of $85.9 million in the third quarter of the year.
Pandora’s value proposition is in question as Apple Music surges and Spotify maintains a paying user base of about 20 million. While Pandora remains a radio streaming service that does not give users the ability to choose specific songs or albums to play, competitors like Apple Music, Spotify, and Google Play Music give users that freedom, in various forms.
Pandora’s defense of its viability in the face of the ever-growing crop of competitors is to question the long-term sustainability of those on-demand models. On the third-quarter earnings call, Pandora CEO Brian McAndrews questioned the sustainability of Spotify in particular, given that its free on-demand, ad-serving business model is rubbing music labels the wrong way. He said he thinks models like Spotify offering perpetually free music streaming will attract younger audiences, but “Whether that’s sustainable or not is a very different question.”
Apple Music’s free three-month trial was a significant instance of the free on-demand model that Pandora is throwing shade at, but many of those trial periods have recently ended. Still, free on-demand options don’t seem to be “economically sustainable, nor does that seem to be a good thing for the industry,” said Pandora CFO Mike Herring. “Those leaky buckets will be plugged.”
Pandora’s murky future, especially now that Apple Music has burst onto the scene, is underscored by its shrinking number of “active listeners.” The company finished the third quarter with 78.1 million active listeners, which is down from the 79.4 million active listeners it had before Apple Music launched.