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Pandora Media ( P ) is spending big as it digests its $75 million purchase of Web-streaming service Rdio, said investment bank Needham, which on Wednesday significantly lowered its 2016 EBITDA estimate for the No. 1 music streaming service. Pandora stock has sagged since the June launch of Apple ( AAPL ) Music — a service combining paid subscription music streaming with a 24/7 live global Internet radio station. While Pandora remains the Internet streaming leader, its market share is falling as competition grows. Pandora stock was down almost 3%, below 10, in late-afternoon trading in the stock market today . Besides Apple Music, Pandora is also in a heated battle with rivals including Spotify, iHeartRadio, Amazon.com ‘s ( AMZN ) Amazon Prime Music and Google Play Music from Alphabet ( GOOGL ). Needham analyst Laura Martin cut her 2016 EBITDA (earnings before interest, taxes, depreciation and amortization) estimate for Pandora to “negative $70 million” from her prior positive $50 million. “The gap downward is largely due to $50 million extra research-and-development spending for a new on-demand service, $30 million for Rdio employees (mostly engineers) and $40 million to market/launch a new on-demand service,” Martin wrote in a research note. “By implication, about $90 million of spending might get pushed into next year if Pandora can’t complete agreements with all record labels by Q3 2016.” Pandora posted an EBITDA loss of $31.1 million in 2015, according to Needham, down 57% from $72.5 million in 2014. “Recall that today Pandora competes in the 80% of the market that is ‘lean back,’ ” said Martin, referring to curated versions where the music-streaming service picks the tunes listeners hear. The remaining 20% is “lean forward,” she said, a term referring to more personalized music that “Pandora is investing in during fiscal year 2016 in order to create an on-demand service similar to Spotify.” Needham maintained a buy rating and 12 price target on Pandora stock. Pandora bought Ticketfly for $450 million in October, vaulting the online music-streaming leader into the live-event and ticket sales business. The company completed its purchase of Rdio in December. Overseas expansion will likely take center stage in 2016, analysts say. Pandora’s biggest rival outside the U.S. is Spotify, which is in more than 60 markets. Besides the U.S., Pandora operates only in Australia and New Zealand, launching in those markets in 2012. Pandora must pay to acquire music rights country by country, which can significantly add to its already heavy spending on music-acquisition costs. Pandora reported a fourth-quarter earnings miss in February, as its active listener base fell and acquisitions and other costs took a toll. Scalper1 News
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