Pandora Media is in the middle of a fight with the music industry groups over its royalty rates. Today, for example, it announced that it had joined a new coalition of other technology and broadcasting companies to lobby for changes, along with Clear Channel Communications, the Digital Music Association and the Consumer Electronics Association.
But the biggest factor on Pandora's health this week seemed to be Apple, which for more than a month has been rumored to be working on a competing Internet radio service. Even Apple's silence can cause vertiginous ripples in Pandora's stock price.
On Tuesday, Pandora's stock, which is traded on the New York Stock Exchange, rose more than 8 percent after Apple made no mention of a radio service in its announcement of the iPad Mini. But late Thursday afternoon its shares plunged after Bloomberg News, citing anonymous sources, reported that Apple was planning to introduce the service in the first quarter of 2013.
The shares fell as much as 20 percent this afternoon before trading was briefly halted twice through a volatility trading pause, a safeguard that kicks in automatically when a stock drops 10 percent or more within a five-minute period, a spokeswoman for the stock exchange said. Pandora ended the day at $8.20, down 11.73 percent for the day, but it gained in after-hours trading.
Apple is believed to be planning a feature for its phones and other devices that, like Pandora, would create streams of music customized to a user's taste. This free service would be supported by advertising, and Apple would pay music companies a share of those ad revenues, two people briefed on the company's plans said on Thursday.
As a protection in case initial ad sales are low, Apple has also offered to pay the music firms a licensing fee upfront, said these people, who were not authorized to discuss private discussions.
Licensing negotiations can take months, even for a behemoth like Apple. But Apple has told music executives that it wants to introduce the service in early 2013, perhaps around the Grammy Awards, which next year are on Feb. 10.
An Apple spokesman declined to comment.
Pandora does not negotiate its royalty rates directly with record labels but instead uses statutory rates set by a panel of federal judges. Last month, Pandora helped to introduce a bill in Congress that would change that process, potentially lowering its rate. But that bill has met heavy opposition from record labels, artist groups and labor unions, which accuse Pandora of trying to game the royalty system in its favor.
Ben Sisario writes about the music industry. Follow @sisario on Twitter.
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