Report: Apple Is Exploring Creating a Pandora Clone

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Published September 07, 2012

| FOXBusiness

Tech behemoth Apple (AAPL) is reportedly in talks to license music for an online custom radio service, a development that could threaten the livelihood of the leader in this space, Pandora Media (P).

According to The Wall Street Journal, the Apple service would work on its iPhone, iPad and Mac computers and potentially on computers running Microsoft’s (MSFT) Windows operating system, but not on devices powered by Google’s (GOOG) Android operating system.

Still, Apple seems to be positioned to throw its weight around in the music licensing arena, especially given its previous success in reaching deals with record labels that paved the way for iTunes.

Just the fact that Apple, which is flush with cash, is reportedly in talks on licensing music spooked Pandora shareholders, sending the newly-public company’s stock plunging almost 20%.

In addition to the potential challenge from Apple, Pandora has also facec competition from Spotify and iHeartRadio, which is owned by Clear Channel Communications.

Custom radio services allow users to create stations that play music over the Internet that sounds similar to specific artists or songs. The services typically play short commercials after several songs, but are otherwise free to use.

Apple just recently began talks on licensing music and it could be months before it launches a service, the Journal reported. The current negotiations appear more serious than Apple’s prior inquires into this space, the paper said.

Shares of Pandora tumbled 18.22% to $10.28 Friday morning in response to the news, while Apple gained 0.57% to $680.02.

Since going public in June 2011, Pandora’s shares have lost 23%, leaving the company with a market capitalization of about $1.75 billion.

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