Pandora Nears Deals for On-demand Music Streaming

pandora-nears-ondemand-streaming

Pandora Media Inc. is aiming to start expanding its internet-radio service as soon as next month, offering its hallmark free tier as well as two new monthly subscription options that will mark its foray into on-demand music streaming, said people familiar with the matter.

Pandora is close to inking deals with major record companies that will allow it to do so both in the U.S. and in new overseas markets, though the agreements haven’t been finalized, these people said.

While the music industry broadly supports the new paid tiers, some record-label executives are still wary of granting Pandora permission to launch its free service in new foreign markets without the ability to control which songs they put on the free tier.

Until now, the 16-year-old outfit hasn’t had to secure permission from record labels to use their music because it doesn’t let users listen to particular tunes on demand. It also had limited its service to the U.S., Australia and New Zealand—the few countries that make music licensing essentially automatic for internet-radio firms, as long as they pay rates mandated by federal judges or licensing collectives.

Pandora plans to roll out its new subscription tiers in the U.S. and then in other English-speaking countries before launching elsewhere, these people said.

The foreign expansion could jump start growth for Pandora, which has seen its listenership plateau in recent years at about 80 million active monthly users. Most listeners use Pandora’s free tier, with about 4 million subscribing to an ad-free version of its service, Pandora One, for $5 a month.

Neither of Pandora’s current offerings allows users to select specific songs to listen to; instead users pick a custom “station” that includes music similar to their initial choice.

The slowdown in user growth has rattled investors. Shares, which were trading around $20 last fall, fell 35% in November when the company announced a dip in listenership from the prior quarter, and haven’t recovered much since. Shares closed at $12.93 on Thursday in New York. A $90 million settlement Pandora paid late last year to the record labels involving its use of music recorded before 1972 also sent the stock down.

When it launches in more markets abroad this fall, Pandora is planning to create more ways for advertisers to make their pitches on its free tier, while offering a $10-a-month service as well that would give subscribers unlimited access to tens of millions of tracks, much like Spotify AB, and Apple Inc.’s Apple Music. It also is planning to augment its existing $5 ad-free tier with perks such as the ability to skip more songs and listen to music offline, said the people familiar with the matter.

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SOURCE: The Wall Street Journal, Hannah Karp