Yesterday was a big day of news for personal radio service Pandora, as it announced that its chief technology officer and EVP of product Tom Conrad is “transitioning to an advisor role”, while upping the price of its Pandora One subscription from $3.99 a month to $4.99.
Conrad said that he’d been thinking about leaving for about 18 months, but was delayed by his role in smoothing the transition between former CEO Joe Kennedy and new boss Brian McAndrews.
“As I look at the revitalized executive leadership team he has put in place, consider the great leaders on my own team, and contemplate the exciting roadmap we’ve set for the future, I’ve decided that all the pieces are in place to allow me to step aside and let others write the next chapters,” wrote Conrad in an email to colleagues.
The company’s VP of engineering Chris Martin has been promoted to CTO in his place, while Pandora is recruiting a chief product officer. “I am incredibly confident in the trajectory the company is on, the leadership that Brian and the executive leadership team will bring,” wrote Conrad, in what appears to be an amicable departure.
The team he’s leaving behind will continue to grapple with the economics of personal radio, as shown by yesterday’s price rise. The ad-free Pandora One subscription made its debut in 2009, costing $36 a year or $3.99 a month. Now the annual option is being scrapped, while the monthly cost is rising by a dollar.
Pandora blamed royalty costs for the rise: “The costs of delivering this service have grown considerably. For example, the royalty rates Pandora pays to performers via SoundExchange for subscription listening have increased 53% in the last five years and will increase another 9% in 2015,” explained a blog post.
Subscriptions remain a relatively small part of Pandora’s business: it has 3.3m subscribers out of 75.3m active monthly listeners, and in its last full financial year, subscriptions generated $51.9m for the company, compared to $375.2m in advertising revenues.
“We certainly advertise our subscription model as an opportunity, but our goal isn’t to drive all our people to the subscription model,” said McAndrews in an appearance at the Morgan Stanley Technology, Media & Telecom conference in March. “We really believe the bigger opportunity is free.”
So while rising costs are undoubtedly a factor in the Pandora One price rise, it’s the performance of the company’s advertising business that really governs its ability to find a sustainable business model.