Microsoft's downsizing could spawn a larger competitor in the crowded field of music streaming apps.
MixRadio, part of Microsoft's Nokia division, is available through a website and as an app built exclusively for Microsoft Windows devices. But MixRadio said last week that it's seeking investment to become a standalone company. That means the app, which streams genre-separated, curated playlists, could come to Android and Apple devices soon.
"MixRadio plans to become a third-party service, delivered by a separate company, and continue to be preloaded on Microsoft devices," the company said in a statement. Microsoft wants to focus on building a solid platform like Android or iOS and is less concerned about building apps exclusive to Windows devices.
MixRadio's prospects on its own, though, are dim, analysts said.
"The digital media markets tend to be winner-take-all markets," said Laura Martin of Needham & Co. "It's really hard to be one of the other entrants because Pandora is the dominant digital winner."
Even then, music streaming apps such as Pandora and Spotify aren't making sustained profits. As they add more users, they are spending more on royalty payments.
Pandora shares, down to 26.84 from a high of 39.43 in March, have been trending upward lately on the New York Stock Exchange. The company releases its latest earnings report on Thursday.
Neil Doshi, an analyst for CRT Capital Group LLC, remains optimistic about Pandora because its base of 70 million users gives it an edge.
He sees Pandora building a large force of local ad sales agents and taking advantage of the growing compatibility between cars and smartphones.
"Ultimately if you're driving along and you're listening to music that's really interesting versus being force-fed by radio, they'll be less likely to switch channels when ads come on," Doshi said. "Imagine driving around Westwood, and you hear an ad for Falafel King, that's going to be much more impactful than if you heard a general advertisement for Bank of America."
Pandora's lead hasn't quieted competitors though. Niche apps such as Crossfader fill needs in specific situations, such as playing music at a DJ-less party.
The leading smartphone manufacturers, Apple with Beats and Samsung with Milk, have music streaming apps. Google and Amazon are also trying to improve music listening. And Doshi doesn't think it's far-off to see Facebook entering the game at some point by buying Spotify.
"I still feel like we are in early innings, so I wouldn't count anyone out," Doshi said. "But Pandora has a good product that's not broken."