Friday, March 1, 2013

Pandora Radio's decision to limit free streaming to 40 hours per month will backfire, help their competitors

LIsten to a lot of Pandora Radio? You might be listening a little less, after the company has decided to limit the amount of streaming that people who don't pay a monthly fee will be able to hear. The limit will be 40 hours (and yes, I'm presuming that includes the ads they run quite often during the free streaming).

I have to say that this doesn't seem like a wise move to me. I listen to Pandora a lot, and I am willing to put up with the ads, which I see as an alternative to paying the monthly fee and avoiding ads. In a way, I am paying, because the ad money is going to Pandora instead of my monthly fee.

But apparently that's not enough for the company. In a way it's not a big deal. If I get to 40 hours and can't listen anymore that month, no big deal. I'll live. There are plenty of other music sources I can use to get my enjoyment. Pandora say that you can pay 99 cents and continue to listen unlimited (with ads) for the remainder of the month once you get to the 40 hour limit, but I would have no desire to do so, just on principle (it's not about the money with a number that low; it's just silly that they're even asking for it).

See, that's where Pandora has screwed up. See, they must also realize that if people start to get annoyed with this kind of forced subscription for avid listeners, they will go to other music sources like Slacker Radio, Spotify, etc. And if all of those services follow this business model, I'm sure another company will crop up that does offer free unlimited streaming that is subsidized by ads and not the pockets of listeners.

Maybe I'm wrong, but from my vantage point, this won't end well for Pandora, who will lose a lot of listeners and hurt their overall popularity -- while boosting the popularity of their streaming competitors.

Below is the letter I was emailed by Pandora (which, apparently, wants me to call their founder by his first name ... I didn't know we were buddies)

Hi, it's Tim –
I hope this email finds you enjoying a favorite Pandora station.
I'm writing to give you an important heads up. In an effort to balance the reality of increasing royalty costs with our desire to maximize access to free listening on Pandora, we are implementing a 40-hour per month limit on free mobile listening.
Pandora's per-track royalty rates have increased more than 25% over the last three years, including 9% in 2013 alone and are scheduled to increase an additional 16% over the next two years. After a close look at our overall listening, a 40-hour per month mobile listening limit allows us to manage our costs with minimal listener disruption.
Less than 4% of listeners will ever hit this limit, but based on your listening it seems that you might. To keep the music you love flowing we have a variety of easy options for you to consider if you reach the 40-hour limit: listen for free as much as you'd like on desktop and laptop computers; pay $0.99 for unlimited, ad-supported listening for the remainder of that month; or become a Pandora One subscriber to get unlimited listening with no advertising.
We'll be implementing this change starting in March and will be sure to let you know if you're approaching the limit. As always, your feedback and suggestions are welcome, so don't hesitate to shoot us an email.
Thanks for listening,


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