Why Is Spotify More Valuable Than Pandora?

June 28, 2016

There is a multibillion-dollar valuation gap between Spotify and Pandora. Here’s why that’s completely reasonable.

In the music industry, and perhaps all of tech, there may not be a better example of divergent paths than those of Pandora (NYSE:P) and Spotify.

Spotify’s ascent as the most used digital-music service in the world has paralleled a similar increase in its private market valuation. As of its most recent round of fundraising, Spotify’s valuation now sits at an impressive $8.5 billion.

Then there’s Pandora. The online music pioneer’s market cap peaked at slightly more than $7.5 billion in early 2014, only to see its stock plummet since then by roughly 75%. Today, Pandora’s market capitalization stands as a mere fraction of Spotify’s most recent private market valuation. So why is Spotify more valuable than Pandora?

  • Pandora’s business model as a hurdle
  • Subscriptions > Ads

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