Is Spotify a Threat to Pandora?

Could the growth of Spotify threaten online radio giant Pandora P? According to Bloomberg, Spotify is close to signing a deal with record labels to offer free mobile radio globally. Spotify offers access to an extensive catalogue of music, allowing users to stream songs over the Internet. Pandora offers a similar service, but unlike Pandora, Spotify lets its users select individual songs and artists -- Pandora only offers online “radio stations” that play a variety of artists. But the key difference between the two services lies in their relation to the mobile Internet. Spotify's free version is only available on desktop computers -- not Google's GOOG Android or Apple's AAPL iOS. If users want to listen to spotify on their mobile devices, they must pay a monthly fee of roughly $10. Fundamentally, Spotify seems like a better choice: the freedom to pick individual songs is alluring, and Spotify's catalog of available songs is far more extensive. But the inability to get free Spotify on mobile devices is a significant limitation. Rich Tullo of Albert Fried has a Market Perform rating on Pandora and $13 price target. He doesn't believe that Pandora will be the best stock for equity investors, but Tullo loves the company. He told me that he doesn't view Pandora's competitors -- including Spotify -- as a threat. Still, Spotify has aggressively expanded in recent years. If it can bring its free service to mobile devices, Pandora investors should be concerned.