Apple Inc. (AAPL) iTunes Radio: Good for Pandora Media Inc (P), Bad for Sirius XM Radio Inc (SIRI)?

Page 1 of 2

Shares of Pandora Media Inc (NYSE:P) moved higher — and Sirius XM Radio Inc (NASDAQ:SIRI) moved lower — on Monday afternoon in the aftermath of Apple Inc. (NASDAQ:AAPL)‘s presentation to kick off its annual WWDC event for developers.

Why did Pandora move higher? Apple Inc. (NASDAQ:AAPL)’s long-anticipated iTunes Radio service was finally unveiled, and while the model is probably too close for comfort to Pandora Media Inc (NYSE:P)’s pioneering music discovery platform, at least now there are no more uncertainties. Pandora knows what it’s up against, and there’s a certain level of relief with that.

Apple Itunes

Why did Sirius XM Radio Inc (NASDAQ:SIRI) move lower? The iTunes Radio service — where consumers can create Pandora Media Inc (NYSE:P)-like stations — isn’t all that different than the assault that satellite radio has been able to contend with in the past through Pandora and lesser rivals. However, it was Apple Inc. (NASDAQ:AAPL)’s push for iOS in cars that spooked investors.

Apple announced that Honda, Mercedes, Nissan, Ferrari, and Infiniti will be integrating more iOS features in their cars by as early as next year.

Now, Sirius XM Radio Inc (NASDAQ:SIRI) is no stranger to the connected car. It has surprisingly worked in Sirius XM’s favor. CFO David Frear revealed earlier this year that drivers of cars with smartphone-tethered vehicles convert at a higher rate than those who don’t. Most of the newer cars on the market already make it easy for a smartphone owner to use USB ports or Bluetooth to play tunes and podcasts through iTunes or stream popular apps.

However, it’s just worth the hassle for many smartphone novices. That may change next year as car LCDs provide phone, text messages, and other functions. A photo during the presentation revealed dashboard icons on a screen for phone calls, messaging, mapping, and music. The fear — one would assume — is that there are now many Trojan horses here to disrupt Sirius XM’s model. Whether someone wants hands-free phone conversations or free navigation, there will be so many reasons to get up to speed with in-car iOS functionality that it will become that much easier to stop paying $14.49 a month for Sirius XM Radio Inc (NASDAQ:SIRI) with so many cheaper options.

Apple Inc. (NASDAQ:AAPL) isn’t afraid to sell itself cheap with iTunes Radio. In a surprising move, Apple will offer it for free as an ad-supported model. An ad-free version is included for those paying $24.99 a year for iTunes Match, which effectively makes it cheaper than Pandora Media Inc (NYSE:P)’s ad-slashing Pandora One subscription that costs $36 a year.

Page 1 of 2