As more people begin to use their mobile phones as the main
source for listening to music, one music streaming company is seeing the
negative effects due to the increase in mobile streaming. On February 27th,
Pandora announced they will be capping the amount of music users are able to
stream from their mobile devices. The change will effect listeners who have
streamed 40 hours of music in a single month on a mobile devices (maybe I
should dust off my iPod). Pandora
expects fewer than 4% of listeners to hit the limit, but if that does occur
they will have the option to pay 99 cents for unlimited streaming for the
remainder of the month. Approximately 75% of Pandora users access the music
through their mobile devices, which in turn the company has been unable to
focus on the advertising of their mobile service compared to desktop service.
To avoid the possibility of exceeding 40 hours of listening through mobile,
users can still utilize unlimited free desktop streaming, pay the 99 cents as
mentioned above, or subscribe to Pandora One for $3.99 per month for ad free
listening.
Executives expect the cap to be temporary in order for
Pandora to generate enough revenue through advertising or for Congress to pass
legislation that would lower the royalty rates it pays per song. Every time Pandora streams a song, they are
hit with a significant amount of money to cover for the royalty costs.
Royalties have risen more than 25% over the last three years and are expected
to rise another 16% over the next two years. Pandora generates its revenue
through advertising, which has not grown at the same rates to keep up with the
royalties.
In the competitive landscape, satellite radio provider SiriusXM
charges a whopping $14.49 per month for Internet Radio which supports listening
to channels on your computer or smartphone or you can add an extra $3.50 a
month if you already have a SiriusXM subscription in your car. Another
competitor, Spotify, has several pricing and service tiers similar to Pandora.
For example, you are able to listen to Spotify radio version for free on your
computer, buy an unlimited ad-free subscription for $4.99/month for your
computer or listen to music on all devices for $9.99/month.
Do you think the
cap will have an effect on promoting Pandora’s premium subscription
service? Or do you feel that Pandora
should reevaluate their premium options and strategy?
Post A Comment:
0 comments so far,add yours