Radio And The Emperor’s New Clothes

The Emperor's New Clothes - (2) - procession

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Pandora’s stock price, much to the dismay of most of the broadcasting world, was back over its IPO price as of close of the market on Monday. It turned out that Pandora’s IPO hit the market the day before the (most recent) bad news about Greece. It wasn’t just a bad time for Pandora, it was a bad time for Apple, and lots of other stocks as well.

Nonetheless, last week some radio trades were gleefully reporting on Pandora’s tanked stock price and failed IPO. Which is exactly what many broadcasters wanted to hear. So my question is this: Why was the broadcast marketplace generally so delighted at the failure of the first significant IPO in Internet radio?

After a week mulling this over I have to conclude that it’s because radio broadcasters are so determined that their FCC licenses and their towers retain value that they cannot see the vast opportunity that lies in front of them. They are so invested in their status quo that they are ignoring the fact that listeners want to listen online. And they’re cheering for the failure of companies like Pandora rather than watching their progress as a signal of their own opportunity.

We have lots of research and reason to believe that listeners want to listen to Internet radio. Pandora’s success is just one example of that. The Arbitron/Edison Research Infinite Dial Study tells us that Internet radio’s audience is doubling every five years. But despite the empirical data that shows listeners wanting to listen online, many broadcasters won’t believe it. They think that if they close and lock the doors their listeners won’t be able to escape to other listening platforms.

It’s simply not true. Listeners can listen to whatever they want. Limiting access will cause them to look elsewhere. Delighting in a failed Internet radio IPO won’t make Internet radio go away.

In fact, Pandora’s IPO wasn’t a failure. They succeeded in raising almost $235 million in their IPO.  And due to bad timing, their stock price dipped afterwards like many others. Like the emperor who was delighted to hear that his new clothes looked so smart, broadcasters are pleased to hear that Pandora’s IPO failed and Internet radio is doomed…

One response

  1. Reminds of something. First they ignore you, then they laugh at you, then they fight you then you win.

    As for my own personal opinion, I think the lack of a ton of competitors for Pandora just yet resulted in the bigger market opportunity being priced into Pandora’s valuation as a whole (or close, at least in sentiment). Once risk is diminished and Pandora is diluted by 5-15 players in next 5 years, the stock may perform quite differently. But that would not be an indication that the market isn’t there as a whole.

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