Will Pandora (P) Start On-Demand Streaming Service Soon?

Shares of Pandora Media, Inc. (NYSE:P) were up nearly 3.3% in yesterday’s trading session, after media reports revealed that the company may be close to launching its on-demand music streaming service.

A Wall Street Journal report revealed that the company may start offering the service in a month’s time. Reportedly, Pandora will be rolling out two new paid subscription plans while also tweaking its existing plans. The report stated that the company is close to striking licensing deals with major record companies.

So far, the Internet-radio service provider didn’t require permission from record companies in the absence of on-demand services. Pandora users could only personalize the radio stations to some extent but they had no option to listen to their favorite numbers.

The company now intends to launch its services internationally, which mandates it to obtain the necessary licensing rights.

Pandora investors were encouraged by this news as evident from the upside in its shares. This is because, of late, the company had been struggling to expand its subscription base. In the last reported quarter, the company’s sales from subscription service (and other revenues) rose merely 1% year over year to $55.1 million. Furthermore, increasing competition from peers like Spotify, Apple (NASDAQ:AAPL) and Amazon (NASDAQ:AMZN) continues to create challenges for the company’s growth.

An on-demand service along with international expansion will likely give a significant boost to the company’s listener and subscriber base while also opening more avenues for advertisement, a critical contributor to its revenues.

In the last earnings call, CEO Tim Westergren had stated his plans to launch an on-demand service in the back half of this year. However, there has been no official statement regarding the timing and other details of the plan.

Currently, Pandora carries a Zacks Rank #3 (Hold). A better-ranked stock in the same space is MeetMe, Inc. (NASDAQ:MEET) , which has a Zacks Rank #2 (Buy).