Pandora’s mobile usage has been rocketing, and its mobile ad revenues have been growing fast too. Not fast enough, though. The company is introducing a 40-hour monthly cap on free mobile listening, although it says the change will affect less than 4% of its monthly active listeners (meaning around 2.6m people out of 65.5m active listeners).
“For perspective, the average listener spends approximately 20 hours listening to Pandora across all devices in any given month,” writes founder Tim Westergren in a blog post explaining the changes. “Pandora’s per-track royalty rates have increased more than 25% over the last 3 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 these escalating costs with minimal listener disruption.”
Free listening is still unlimited on the desktop, but users wanting more than 40 hours a month on mobile will be encouraged to pay $0.99 for unlimited mobile usage in any given month – or sign up to Pandora’s One premium service. “In short, this is an effort to balance the reality of increasing royalty costs with our desire to maximize access to free listening on Pandora,” writes Westergren.
At a time when ‘mobile-first’ is an increasingly common buzzphrase in digital music circles, Pandora’s change is a sobering reminder that for now, mobile advertising revenues aren’t keeping up with escalating demand for music on the move. No wonder there’s anticipation around upcoming launches from Apple and Google, to see if they can nail the mobile ad-supported business model.