Pandora announced this week that it is going to making some significant changes to its Pandora One subscription service over the next couple of months. Most notably, it’s going to be raising the monthly subscription cost and eliminating the annual option.
Citing rising licensing costs, Pandora says that it’s raising its ‘One’ fee from $3.99 per month to $4.99 per month, and taking away the discounted annual plan altogether. The company says that royalty rates it pays to artists have increased 53% since it began…
From the announcement on Pandora’s blog:
In order to continue to provide an ad-free listening option, we are implementing some changes to the way we price Pandora One, including a modest price increase for new Pandora One subscriptions:
– 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.
– For new subscribers, the subscription price will change to $4.99 per month starting in May.
– Existing annual subscribers that remain active will migrate to a discounted loyalty price of $3.99 per month at their next renewal period.
– We are ending the annual subscription option.
The move is a bold one, but not surprising. Pandora has long complained of rising licensing fee costs—last year 48% of its revenue went to artists. The company continues to make nearly 4x as much from ads on its free service as it does from One subscribers.
Beginning this week, annual subscribers approaching their renewal date will be notified of the changes, but monthly pricing for new subscribers won’t take effect until May. This will give new folks a chance to get in on the cheaper pricing before it disappears.
But even with the price hike, Pandora One is still half the price of its competitors. Both Spotify and Beats Music cost $9.99 a month, and Rdio ranges from $4.99 to $14.99 depending on the device. Apple’s iTunes Radio does not currently offer on-demand music.