Macquarie’s Amy Yong believes Apple Inc. AAPL's interest in Tidal Music could motivate a strategic buyer to look at Pandora Media Inc P as a potential target.
Yong maintained an Outperform rating on Apple, with a price target of $112. The analyst also maintained an Outperform rating on Pandora, with a price target of $15.
“Apple's interest in Tidal shows just how difficult it could be to launch an audio entertainment platform. Streaming service Tidal Music, backed by majority owner Jay Z, has 4.2m paying subs,” the analyst mentioned.
Yong also noted Tidal Music had two tiers of service, $10 and $20, for a 40 million song catalog, in comparison to Apple Music at 30 million and Pandora at 1 million.
The combination of Tidal with Apple Music would expand Apple’s paying subscriber base to 20 million.
It would also create “an even more competitive service as the two are notorious for hosting exclusive album launches.”
In addition, Apple acquiring Tidal Music could spur a strategic buyer to look at Pandora, “as a way to jumpstart or enhance its digital audio entertainment platform,” the analyst stated.
Positives for Pandora Media
Yong also pointed out that the Justice Department has upheld the 75-year-old consent decree for PROs, which now allows Pandora to retain the current rate that it pays for publishing rights.
The analyst believes both the potential M&A and the decree being upheld would prove positive for Pandora.
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