Analysis

Pandora Premium tier to launch this week in the US


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Pandora will begin sending out invitations to try its new $9.99-a-month Pandora Premium tier this Wednesday (15 March) in the US.

The news means Pandora will meet its target of launching its direct rival to Spotify, Apple Music and other on-demand music-streaming services by the end of the first quarter of 2017.

The invitations will offer a free trial of Pandora Premium, although the company says the length of that trial will vary for new users and people who listen to its free tier.

However, subscribers to its $4.99-a-month Pandora Plus tier will be offered six months of the Premium tier for no extra charge. Pandora ended 2016 with 4.4 million Plus subscribers.

The company showed off its Premium tier at an event in New York in December, with a strong emphasis on personalised music playlists and recommendations.

For existing listeners, every song they’ve ever “thumbed up” on Pandora will be available as a ‘My Thumbs Up’ playlist, but they will also be able to get help creating new playlists by choosing one or two songs and then tapping an ‘Add Similar Songs’ button – similar to the ‘Recommended Songs’ feature for Spotify’s playlists.

Pandora Premium will also offer personalised recommendations for listeners in its ‘Browse’ section; will enable albums, song-based stations and playlists to be downloaded for offline listening; and is hoping to steal a march on rivals by promising “no more wading through covers, karaoke versions or tribute tracks to get to your favourite tune”.

This week, Pandora has also revealed that its Premium tier will be accessible from its iOS and Android apps, as well as through Google Chromecast, Apple CarPlay and Android Auto, and in selected cars from GM, Honda, Hyundai, Mazda and Subaru.

However, that means listeners wanting to access it through the desktop, as well as via connected devices like (to name a few) Sonos, games consoles and set-top boxes will have to wait for them to be supported “in the coming months”.

The US is the first country to get Pandora Premium, although the company has been negotiating licensing deals with a global rollout in mind.

In its earnings call last October, Pandora revealed that it had made $120m of upfront payments relating to its direct licensing deals, while committing to guarantees of around $700m over the next “several years” to rightsholders.

Pandora Premium

The launch of Pandora Premium comes at a time of renewed speculation about the company’s future, however.

Rumours that it may be an acquisition target – particularly for media group Liberty Media – continue to bubble, with negative comments by the latter company’s CEO about Pandora’s valuation seemingly more an attempt to drive down the price rather than back away from the deal entirely.

Pandora’s most recent financials revealed that the streaming service’s revenues grew by 19% to $1.39bn in 2016 – including $1.07bn of advertising income and $225.8m of subscription revenues – but that its net losses doubled to $343m.

“We enter 2017 with a clear set of strategic priorities, and a solid plan to execute against them,” CEO Tim Westergren told analysts after those financials were published in February.

His company is betting that it can build its base of Plus and Premium subscribers by upselling a decent chunk of the more-than 76 million people who listen to its free, ad-supported tier – and thus keep marketing costs under control.

In February, Westergren said that more than 70% of new Pandora Plus subscribers had been “acquired on-platform, virtually free of acquisition cost” as proof that this strategy has legs.

Pandora is aiming to sign up between six and nine million subscribers by the end of 2017 – that includes the 4.4 million people already paying for Pandora Plus – to make it one of the key players in the music-subscriptions market.

“Pandora’s unique in the size and the quality of its audience, and the ability to really message to them contextually,” said Westergren. “But ultimately, it’s about the quality of the product. I think the reason that you’re not seeing the kind of growth [elsewhere] that some people anticipate that the products are very hard to use. We really don’t think there is a true premium product on the market yet.”

This week, we’ll get our first indications of whether Pandora has been able to deliver on its goal of bucking that trend.

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Stuart Dredge

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