Seeking Alpha

Pandora hiking subscription prices

  • Pandora's (P) ad-free One radio service, currently offered for $36/year or $3.99/month, will cost $4.99/month for new subscribers starting in May. Annual subs will get a "discounted loyalty price" of $3.99/month at renewal time, and current monthly subs will see no price changes.
  • Higher royalty rates are blamed for the hike. Pandora says the rate it pays to recording royalty group SoundExchange (responsible for a large chunk of its licensing fees) has risen 53% in the last 5 years, and is expected grow another 9% in 2015.
  • Pandora's "subscription & other" revenue soared 132% Y/Y in Q4 to $38.8M, and made up 19% of total revenue. The company ended 2013 with 3.3M subs (compares with 75.3M active listeners in February).
  • The ad-free version of Apple's iTunes Radio costs only $25/year, and comes bundled with an iTunes Match subscription. But the service doesn't work on Android devices.
  • Earlier: Pandora's CTO/product chief stepping down
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Comments (19)
  • manicdvln
    , contributor
    Comments (800) | Send Message
     
    Why would anyone pay that much for glorified radio with no ondemand or offline caching.

     

    What a rip off, Pandora costs keep rising and raising the prices will slow growth even further.
    18 Mar, 07:09 PM Reply Like
  • FATUGLY
    , contributor
    Comments (44) | Send Message
     
    Apparently 3.3M subs do not think $3.99 is a so called "rip off". It all depends on what music you like, how easy it is to select your artists, how often Pandora plays your selected artist, and if you can find the spare change of $3.99. Life is short,enjoy yourself.
    18 Mar, 10:33 PM Reply Like
  • Andrei Volgin
    , contributor
    Comments (590) | Send Message
     
    And the house of cards starts to crumble.
    18 Mar, 07:58 PM Reply Like
  • Charles Moscoe
    , contributor
    Comments (1625) | Send Message
     
    If apple ever decided to support Android with their radio, that could spell the end of the Pandora. Unsustainable valuation and limited growth. $P is a great short.
    18 Mar, 08:03 PM Reply Like
  • Mark Krieger
    , contributor
    Comments (4117) | Send Message
     
    remember when NFLX tried to raise their prices? subscribers left in mass qty...This sounds like pure desperation by P!
    18 Mar, 09:13 PM Reply Like
  • PChan444
    , contributor
    Comments (514) | Send Message
     
    Don't argue with market. It is smarter than MK
    19 Mar, 02:44 AM Reply Like
  • Kenjisan
    , contributor
    Comments (49) | Send Message
     
    Yikes. $3.99 to $4.99 is a 25% hike

     

    It's really like netflix. It's cheap but this will make people think if they need their subscription

     

    With iTunes Radio and spotify and iheartradio as alternatives, why would people stay.

     

    Definitely not good news
    18 Mar, 09:51 PM Reply Like
  • Look2thefuture
    , contributor
    Comments (47) | Send Message
     
    Best $5 I'll spend a month. You guys are being ridiculous. Pandora is awesome in my opinion. I made nice money off the stock too. Just sold and took my profits which will pay for my monthly subscription for a long long time. How you haters doing?
    18 Mar, 10:17 PM Reply Like
  • Andrei Volgin
    , contributor
    Comments (590) | Send Message
     
    Smart move to get out of this stock before it crashes.

     

    I am sure that many people were not thinking of moving, but a price hike would make them take a closer look at the alternatives, and many will find them more attractive.

     

    A lot of people would move to iTunes Radio ($25 per year with no ads AND iTunes Match), Milk (free with no ads to all Samsung owners), Nokia MixRadio (free with no ads to all Nokia owners), or Google All Access/Spotify ($10/month with on demand listening in addition to a radio option). All of these services offer 20 times more content than Pandora.

     

    Note that iTunes Radio and Spotify have been growing much faster than Pandora over the past 6 months. This price hike makes them even more attractive in comparison.
    18 Mar, 11:34 PM Reply Like
  • Kenjisan
    , contributor
    Comments (49) | Send Message
     
    Why not keep the stock if you think we're being ridiculous and you think Pandora is so awesome?
    19 Mar, 05:36 AM Reply Like
  • Look2thefuture
    , contributor
    Comments (47) | Send Message
     
    Because the stock is different than the product. Stock can go up or down based on emotion because of good or bad news. I'll probably buy it back if I feel it would be a good deal. Plus I am redoing my kitchen so I need the money haha. All seriousness though think about all the crap people buy a month, in my mind 5 bucks is not a big deal. That doesn't even buy a beer in NY in a lot of places. I have a subscription already, does that mean I am locked in at the 3.99 rate? Does the 4.99 only apply to new subscriptions?
    19 Mar, 10:05 AM Reply Like
  • Kenjisan
    , contributor
    Comments (49) | Send Message
     
    in that case, how are we being ridiculous? You and I agree that $P's price is overvalued. We're on the same page.
    20 Mar, 04:29 PM Reply Like
  • Guardian3981
    , contributor
    Comments (2091) | Send Message
     
    Its pretty much a business based on customers being lazy, so yes it will stay in business.
    18 Mar, 11:08 PM Reply Like
  • lihuelouie
    , contributor
    Comment (1) | Send Message
     
    It's worth $10/month. Any subscriber of more than 6 months will stay on board for ad free service. with more than 20 "stations" from Mozart to Farmer in the Dell, we have it in on from 9am to 10pm. Gladly pay the increase. You shorts really are doomsday bums.
    19 Mar, 02:45 AM Reply Like
  • Risky Asset
    , contributor
    Comments (2) | Send Message
     
    So let me see if I have this correct. For only $4 more per month I can use Spotify instead and have access to 20x the music and the ability to stream or download songs whenever I please? Plus I can follow all of my favorite artists and create and share playlists with friends on Facebook. What rational individual would choose to subscribe? Expect a majority Pandora One customers to leave over the next 18 months.

     

    Once Spotify starts to really take off in the US, its game over for Pandora.
    19 Mar, 03:35 AM Reply Like
  • dgulick
    , contributor
    Comments (1562) | Send Message
     
    Pricing won't change on existing subscribers as they will be grandfathered in. Also interesting that they are offering listeners a chance to become a subscriber at the lower pricing even if you weren't a subscriber before, may convert some to lock in the cheaper monthly price. And even with the increase, P is still half the price of Spotify. Will be interesting to see the results, but I suspect mostly it won't have an impact, especially since only 3.3M of their 75M listeners are subs.
    19 Mar, 08:20 AM Reply Like
  • Andrei Volgin
    , contributor
    Comments (590) | Send Message
     
    If there is no impact, why do it at all? I think the management looked at the numbers this quarter and decided that they have no choice.
    19 Mar, 09:38 AM Reply Like
  • dgulick
    , contributor
    Comments (1562) | Send Message
     
    There is an impact, improved monetization of subs, I suspect that is the only impact, actually. Will some cancel? Maybe a few.
    19 Mar, 11:59 AM Reply Like
  • manicdvln
    , contributor
    Comments (800) | Send Message
     
    If Pandora went bankrupt today, dglulick would come out and say this is a smart move.
    19 Mar, 11:42 AM Reply Like
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