Pandora co-founder Tim Westergren in February 2015.
Linda Davidson — The Washington Post/Getty Images

The granddaddy of internet radio diversifies as it struggles for profitability.

By David Z. Morris
August 20, 2016

The Wall Street Journal reports that Pandora, the internet radio service, will expand into the on-demand streaming realm dominated by Spotify and Apple Music. Pandora’s new service could be available as soon as next month.

Pandora’s current service, primarily free and advertising-supported, doesn’t allow listeners to pick specific tracks or even artists. Instead, users pick ‘stations’ that automatically select and stream songs based on general similarities. In the U.S. and a handful of other markets, that service operates with a government-mandated license, and Pandora pays rights-holders much lower royalty rates than on-demand services like Spotify.

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Even with those lower rates, Pandora’s model is clearly faltering. It has said it expects to lose more than $200 million this year, its listener base has stopped growing, and its stock has fallen sharply. The company reportedly invited takeover bids early this year, before passing on an offer from Liberty Media.

The new Pandora service would reportedly be subscription-based, at a $10 per month rate comparable to Spotify and Apple Music’s premium services. The service would also reportedly be available in more international markets. Pandora currently offers a $5 per month ad-free version of its radio service, but has only about 4 million paying customers, compared to about 30 million for Spotify, 11 million for Apple Music, and 3 million for Tidal.

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The introduction of a premium service would seem to have been in the works for some time, as seen in Pandora’s acquisition last year of some parts of defunct streamer Rdio. However, those assets did not include Rdio’s on-demand licensing deals, which are distinct from radio streaming licenses, and must be negotiated directly with rights-holders.

Pandora’s efforts to become profitable have also included diversifying into concert ticket sales.

 

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