Is Apple trying to kill Pandora?

It's fortunate that my current contract prevents me from getting the iPhone 5. By the time I'm unshackled, in approximately a year, I presume the mapping situation will be fixed, and other bells and whistles will be added, or improved.

I do have iOS6, and have noted some minor mistakes on its map app driving around town. Before I venture to parts lesser known, I'll have to download a separate maps app, or print out a Google map and glance at it while driving. That's a drag, but let's put it down alongside Apple's other rare slips, like Ping or MobileMe.

As a longtime fanboy - going back before the 128k Macintosh - there's something that disturbs me more. For no particularly reason, Apple has decided to get into the Internet radio business, a move that threatens the future of a home-grown pioneer that has already struggled against great odds: Pandora Media.

Now a public company with an estimated 150 million registered users, Pandora grew out of Oakland's Music Genome Project, co-founded by Tim Westergren in 1999. Using a complicated algorithm, the project codifies hundreds of vocal and instrumental characteristics into five "genomes" ranging from rock and hip-hop to jazz, classical and world music. The genomes form the basis of playlists Pandora provides for users choosing "stations" based on their list of favorite songs, musical pieces, artists or genres, like "Madonna Radio," "Adagio for Strings Radio," "Charlie Parker Radio" or "Salsa Radio."

Since its launch in 2000, Pandora has gone on to capture 74 percent of online radio listeners and a 6.3 percent share of the radio audience nationwide. It's far ahead of rivals like Spotify and Rdio. In July, 55 million registered users downloaded music from its servers. Pandora's app is on every smartphone platform (it's the second most downloaded app on the iPhone), comes pre-installed on most major new car radios, and has steadily increased advertising revenue.

However, profit remains elusive, and it wasn't so long ago that Pandora was staring death in the face. Hemmed in by impossibly high royalty payments to the music industry, Pandora was on the verge of going out of business in 2008, rescued at the last minute by the bipartisan Webcaster Settlement Act, signed by President George W. Bush, enabling online music providers to negotiate lower royalties.

Seeking to level the playing field further - half of its $101.3 million second quarter revenue went to royalties - Pandora is lobbying hard for a bipartisan bill sponsored by Sen. Ron Wyden, D-Ore., and Rep. Jason Chaffetz, R-Utah, that would put Internet radio royalties on the same, lower, basis as those paid by satellite and cable radio channels.

Coincidentally, with Pandora's upbeat third quarter estimates, issued in late August, reports surfaced that Apple was in licensing talks with major record companies for a customized music streaming service much the same as Pandora's. Instant reaction: Pandora's stock price dropped 22 percent.

Talks were so far along, according to some reports, that Apple was scheduled to introduce its streaming service to the world along with iPhone 5 two weeks ago. That is, until Sony balked at the licensing fee Apple was offering.

At least Apple fans have been temporarily saved from another crummy app of its own making. But if Apple is serious, what happens to Pandora, which, by the way, contributes considerable revenue via its one-click link to Apple's iTunes salesroom? Kicked to the curb like Google's maps, in the name of what, besides pure avarice?

Ironically, in the wake of Apple's move, there is talk that Google, or maybe even Amazon, which are both seeking to augment their music and entertainment offerings, could step in as Pandora's white knight. "The people at Pandora know how to make compelling services that people like and love. That kind of expertise is extremely valuable," Tom Taulli, an analyst at IPOPlaybook.com, told Bloomberg Businessweek.

Apple isn't commenting - it never does - and neither is Pandora. "We are in the business of providing the best music experience possible," said Pandora spokesman Eric Brown. "And creating it isn't easy."

When my iPhone contract is up, I'll go where Pandora goes. Should that be an Android phone, so be it.

Source: http://feeds.sfgate.com/click.phdo?i=c094198e81a1d72aca9022630778e18e

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