Pandora Spending More To Launch Successor To Rdio

Pandora Media 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 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 Amazon Prime Music and Google Play Music from Alphabet.

According to Investor's Business Daily, 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.”