Pandora Media Inc (NYSE:P) is planning to come up with a few changes to its premium streaming music service, and the most major change would be a fee hike for new monthly subscribers. On Tuesday, the company revealed that owing to the increased royalty fees it pays to musicians it would have to hike the monthly fee. The hike will be the first one since the launch of Pandora One, in 2009.
“In order to continue to provide an ad-free listening option, we are implementing some changes to the way we price Pandora One,” the company said in a blog.
Rising royalty rates responsible
New rates will be effective from May this year, and new subscribers will be charged $4.99 per month compared to the present monthly fee of $3.99 per month. In the blog post, Pandora Media Inc (NYSE:P) wrote that the cost of providing its services has been rising considerably. Giving an example, Pandora said that the royalty rates it pays to performers via SoundExchange have risen by 53% in last five years, and are expected to increase further by 9% in 2015.
As the hike in effective from May, new users planning to subscribe Pandora One have almost a month to avail themselves of the service at the old price of $3.99 per month.
Pandora leads the market
Pandora One, which is the high-end offering from the company, was initially priced at $36 per year, but later a monthly option of $3.99 per month was added. Apart from the hike, Pandora Media Inc (NYSE:P) has also phased the annual payment option. Despite the hike, the existing active users will continue to pay $3.99 per month, and annual subscribers that remain active will be shifted to a “discounted loyalty price” of $3.99 per month with the next renewal.
Overall, Pandora Media Inc (NYSE:P) has 250 million registered users, and out of those only 3.3 million are Pandora One subscribers. The company said that the price hike in only affecting a small number of users. Despite the competition from companies like Spotify, Rdio, Apple, Google, and even Amazon, Pandora is way ahead with 31% of the US streaming music service market share.
On Tuesday, Pandora shares were down 0.37% to close at $34.98.