Pandora Media (P) on Wednesday will begin rolling out its subscription on-demand streaming music service, called Pandora Premium, which will put it in direct competition with Spotify and Apple Music.
Pandora will start sending out invitations to users for a free trial of Pandora Premium on Wednesday. All current users will receive an option to upgrade to the service in the coming weeks, the Oakland, Calif.-based company said Tuesday.
Investors don't appear to have much confidence in Pandora Premium. Pandora stock was down 6.4%, to 11.59, at the close on the stock market today. The stock was battered last week when Liberty Media (LSXMA) Chief Executive Greg Maffei threw cold water on rumors that his firm would acquire Pandora.
Pandora has been losing ground in the music business as customers gravitate to on-demand services from Spotify, Apple (AAPL) and others. Pandora faces a host of deep-pocketed rivals in the space, including Apple, Alphabet (GOOGL)-owned Google and Amazon.com (AMZN).
Along with that, Pandora has struggled financially. It lost $343 million in 2016, after losing $170 million in 2015.
Pandora currently offers advertiser-supported and subscription commercial-free streaming music services that provide internet radio channels that deliver songs based on genre, style of artist and other factors. On-demand services let users pick the specific song or album they want to hear.
Spotify has 50 million subscribers worldwide. Apple has more than 20 million subscribers to Apple Music.
To be successful, Pandora Premium will need to differentiate itself from competing services that offer largely the same music catalogs at the same price of $9.99 a month.
IBD'S TAKE: Pandora Media has a poor IBD Composite Rating of 24, which means it has been outperformed by 76% of stocks in key metrics over the past 12 months. For more information on Pandora stock, visit the IBD Stock Checkup.
Pandora CEO Tim Westergren told CNBC Monday that Pandora's on-demand service will offer a simpler user interface with a better way to discover music.
"We look at the subscription (music) space and think we're kind of in the first-generation of products right now — it's essentially 30 million songs and a search box," Westergren said. "While that's appealing for a small segment of the population, I think for most people it's overwhelming. And no one has really solved the ease-of-use problem. That's really where Pandora sits here. We've created a differentiated product."
Pandora has more than 100 million users to which it can market its new service, Westergren said.
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