Pandora raises subscription rates, blames rising music roylaties

By Mike Flacy March 19, 2014

Image used with permission by copyright holder

Detailed within a post on the official Pandora blog, the streaming music company plans to increase the monthly subscription rate for Pandora One by 25 percent for all new subscribers starting during May 2014. Specifically, the monthly subscription plan for Pandora One will rise from $3.99-a-month (approximately $48 a year) to $4.99-a-month (approximately $60 a year). In addition, Pandora will be ending the annual subscription option that provided access as a discounted rate of $36 for the year.

Providing reasoning behind the price increase, a Pandora spokesperson wrote “The costs of delivering this service have grown considerably. For example, the royalty rates Pandora pays to performers via SoundExchange for subscription listening have increased 53% in the last five years and will increase another 9% in 2015.” 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.

However, current Pandora One subscribers are going to be provided with a couple options to ease the transition. Anyone on the annual $36 plan will be grandfathered into the $3.99 monthly rate, assuming they want to continue subscribing to the service. In addition, any existing subscribers will get to continue paying the $3.99 monthly rate. Only new subscribers will have to pay the $4.99 monthly rate and that’s assuming they wait until May to subscribe. Up until May 1, Pandora users that subscribe to the One service can lock in the $3.99 monthly rate for the life of their subscription.

Interestingly, this makes iTunes Radio an even more value-driven option since the advertisement 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. Of course, iTunes Radio is only available on Apple devices, thus Android and Windows Phone users are simply out of luck.

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