Internet radio service Pandora Media Inc. (NYSE: P) reported third-quarter earnings after markets closed on Thursday, and the headline numbers were a little better than expected: earnings per share of $0.09 compared with a consensus estimate of $0.08, and revenues of $239.6 million compared with an estimate of $238.5 million. Net income doubled year-over-year, and mobile revenue rose 50%. What’s not to like?

Listener hours did not rise as fast as expected, and the number of active listeners did not match expectations. Pandora’s problem is not that its numbers aren’t okay. It is that there is a lot of competition, and that will get even more intense when Apple Inc. (NASDAQ: AAPL) kicks out its rejuvenated iTunes/Beats service.

Apple spent more than $3 billion to acquire Beats headphones and streaming service, along with its two founders, Dr. Dre and Jimmy Iovine. The company is not about to close its wallet after an investment of that size. Even if Pandora isn’t particularly worried about Apple, investors certainly are.

Apple is said to be negotiating with the record labels for a reduction in royalty payments that would allow the company to charge just $5 a month, equal to Pandora’s current ad-free rate, and half the subscription cost for Spotify. If Apple succeeds (not impossible, but don’t bet on it), the labels would almost certainly have to lower prices to Spotify, Rdio and the rest, or face collusion charges. Lower pricing for every player has almost no chance of appealing to the music industry, especially now that downloads appear to be following CD sales onto the ash heap of history.

The only thing that Pandora can use to hold back an onslaught from Apple is listener count and listener hours. These numbers have to get bigger, faster, if the company is going to have a hope of fighting back. That is what Friday’s share price takedown is all about.

Pandora’s stock was down nearly 16% at $19.50, a new 52-week low, versus a 52-week high of $40.44. Just after noon, volume was nearly three-times the daily average of around 6.5 million shares.

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