Pandora has been on shaky ground for years now struggling with rising bandwidth cost, hosting costs, music royalties and major competition in the online music space. Pandora who for the longest time has been the standard for internet radio in the browser and mobile market. Pandora is always in the top 50 downloaded apps in the Apple App Store and has major brand recondition with music listeners but yet struggles with revenue.
Pandora recently decided to break into the subscription based market after the huge success of services like Spotify, Google Music, Amazon Unlimited and Apple Music proved the market viable for subscription based music services. The question remains to be seen if this model will work for Pandora in the long run? There is something to be said about Pandora moving in the direction of a full music service rather than just radio which has been their core business for years. While Pandora is still offering the free ad supported model that many users enjoy will users spend $9.99 month for a full-blown music service when they are used to listening to Pandora radio for free.
Pandora has always made their money on the advertisement on their website and their app with a paid option for ad free listening, unlimited skips and higher quality audio as the selling point for the upgrade of the service. Pandora has always offered Pandora Plus a $52 dollar a year or $4.99 a month depending on how you pay your subscription. Pandora may be banking on these users possibly upgrading for a few dollars more a month or year to upgrade to Pandora Premium for $9.99 a month.
I think for Pandora it’s going to be hard to get users of the free service to go to the $9.99-month for a full music service when most users are used to just radio and getting the service for free at no cost. These users are mostly your casual music listeners who just want a good radio station to listen to since FM radio is terrible by today’s standards.
I think at this point trying to grab new users looking for a full music service may be an option for Pandora because of their brand recognition among users they may be able to grab new customers. A better play for Pandora may be trying to move users from their Pandora Plus plan to a Pandora Premium account as those users are already used to paying for the service. I think trying to move users from already existing services like Google Music, Apple, Amazon or Spotify is going to be a tough play for Pandora as users already have playlists setup, music downloaded and are comfortable with the services they’re already using.
The good news is since Pandora is available on almost every device on the market Pandora may have a competitive edge over the other services mentioned. Brand recognition has shown us that you don’t always have to be the first to market with a product or service. Apple got out of the gate late with Apple Music but still managed to get 27 million subscribers to Apple Music. Groove Music which was first to market with subscription based music really grabbed no market share despite being first subscription music service.
I think Pandora has a chance at making money with a full music service since it’s a known name in the music market as has a great algorithm for picking great music. I think going to a full music service is a good move for Pandora as it will help them expand their music library even further for free customers. I think with their brand recondition they could be a real player in the music market more so than a new company just starting out in the very cluttered music as service space.