Pandora Points to Royalty Costs for Jump in Subscription Rate

Pandora announced that it plans to increase the monthly subscription rate to its premium, ad-free Pandora One service by 25 percent for new subscribers starting in May (an increase from $3.99-a-month to $4.99-a-month). “The costs of delivering this service have grown considerably,” explains the Pandora Blog. “For example, the royalty rates Pandora pays to performers via SoundExchange for subscription listening have increased 53 percent in the last five years and will increase another 9 percent in 2015.”

According to the Pandora Blog, the streaming music service will end the annual subscription option that offers music at a discounted rate of $36 per year. “Existing Pandora One monthly subscribers that remain active will not experience a price increase at this time and will continue to pay $3.99 per month,” explains Pandora. “Existing annual subscribers that remain active will migrate to a discounted loyalty price of $3.99 per month at their next renewal period.”

“Out of Pandora’s 250 million registered users, this change will affect 3.3 million paying subscribers that generate approximately $150 million in revenue per year,” reports Digital Trends.

The move could possibly help generate new interest in iTunes Radio since the ad-free version is priced at $25 per year.

“In addition, that subscription comes with enrollment in iTunes Match, a service that matches up your music with 256-Kbps AAC quality versions and allows you to access that music through the cloud on your iPad or iPhone,” notes DT. “Of course, iTunes Radio is only available on Apple devices, thus Android and Windows Phone users are simply out of luck.”