Pandora To Start Subscription Music Service

Posted: Sep 13 2016, 8:23pm CDT | by , Updated: Sep 14 2016, 1:07am CDT, in News | Latest Business News


Pandora to Start Subscription Music Service
Photo Credit: Getty Images

Tom Westergren, CEO of Pandora, said to investors last week that Pandora is rarely the first, but always the best, company to bring a product to the market.

After more than a few years of speculation amid dominance from Apple and Spotify, Pandora appears to finally be on its way to creating a subscription-based service that builds on its first ad-free platform, Pandora One. 

The free service has 78 million listeners, according to the company.

Today, Pandora announced that they have signed a series of licensing agreements with the major record labels the Merlin Network, Sony Music and the Universal Music Group and 40 other independent distributors.

Waner Music Group, home to Madonna and Led Zeppelin, to name a few, was missing from the agreement, though they do have licensing ties with Apple and Spotify. According to Westergren, conversations are still flowing.

"This really was a collaborative effort," Westergren, the company's founder, said in a conference call with Wall Street analysts. "The fact that we have this enormous audience on the platform already, for whom we know so much and for whom we reach in a very contextual and targeted way, sets up an opportunity that no one else has, and I think the industry recognized that in the course of our conversations."

The average free user on Pandora will listen to 24 hours of music a month.

Finance chief Michael Herring says that if they are able to convert 10% of listeners of that free service to the $9.99 subscription service, they will add $1.3 billion in revenue by 2020. 

Still, shares of Pandora were falling today.

"Where investors might be underwhelmed here is if you say, 'they're late,' there's already quite a bit of competition and they're fighting a perception issue where people know Pandora for a certain mode of listening," Paul Verna, senior analyst at eMarketer said in a phone interview with The Street. "Investors may be thinking that Pandora's on-demand service could be good, but they're just not totally sure yet."

There have been some rumors that Pandora will eventually offer a tiered service that boasts prices as low as $5, but that has yet to materialize.

"It's certainly a sensible strategy to hit different price points along the spectrum," Verna added. "But it's hard to know if they're offering anything that's really going to move people off one of the other services. There's enough brand loyalty with Spotify and Apple and even [Jay-Z's] Tidal and now Amazon is getting into the game, that you're not seeing this great consumer outcry that we need something different."

Westergren took over as CEO of Pandora in March, and has stressed that this won't be a copy cat of Apple or Spotify. It will work with Ticketfly to help sell concert tickets.

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The Author

<a href="/latest_stories/all/all/46" rel="author">Noel Diem</a>
Noel passion is to write about geek culture.




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