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Pandora CEO says company ready to compete in on-demand streaming service

Pandora co-founder and CEO Tim Westergren said on Wednesday the company is in the perfect position to create a music streaming service that can compete with tech giants such as Apple, Spotify and Amazon.

"We're no stranger to competition. We've been here before and very confident about our ability to execute," Westergren told CNBC's "Squawk Alley."

He said, "...[L]isteners are very engaged, they've been thumbing on Pandora giving us an enormous amount of very precise information about their preferences."

On Sunday, The New York Times reported that the personalized-radio service will introduce an expanded version of its streaming platform in the coming weeks and could charge as little as $5 dollars a month. And by the end of the year, Pandora could release a fully developed competitor to Spotify and Apple. The report also noted Amazon will launch one as well.

Apple and Spotify offer single-person subscriptions at $10 a month with discounts available. Pandora's service may attract users away from those big players.

Pandora has spent months negotiating new licensing agreements. On Tuesday, it announced new agreements with Merlin Network, Sony Music, Universal Music Group and several other labels.

"What these deals that we've struck allow us to do is essentially substantially expand that product to be able to address sort of every consumer need," Westergren said. "If you want lean back, we'll have that. If you want to lean forward, be more engaged, have more interactivity all the way up to a completely on demand service."

Pandora's stock was trading 4 percent lower Wednesday afternoon. The stock is up more than 1 percent year to date.

Michael Graham, analyst at Canaccord Genuity, said there were two main reasons why Pandora shares fell Wednesday.

"There were a lot of people who have bought the stock in hopes of Pandora being acquired. I think management has sent a signal(with the 5-year plan and licensing deals) that selling the company is not a high priority," he said. Second, "the licensing deals that they signed are positive long term but in the short term they result in higher content costs."

Canaccord has a "buy" on the stock.