Confirming earlier reports, Pandora today announced the launch of a new paid music service called “Pandora Plus.” While this service doesn’t offer a true alternative to Spotify, in terms of on-demand listening, the new $4.99 per month ad-free option offers a wider set of features, including the ability to skip more songs, more replays and support for offline listening.
The new service will replace the existing paid option, Pandora One, which focused only on eliminating ads.
This announcement comes only days after the company confirmed it had acquired the licenses to music from three of the top rights holders, Sony Music, Universal Music and the Merlin Network, which represents some 20,000 independents. In addition, Pandora made deals with the Sony-owned distributor The Orchard and more than 30 other independent labels and distributors, it said.
The understanding was that the acquisition of these licenses will allow the company to expand its business to better compete with on-demand services like Spotify and Apple Music.
The announcement also seemed to put pressure on Warner Music, which Pandora had also been in talks with, according to sources at Billboard. And given that the company is now announcing this new paid tier, but not its pricier direct competitor to Spotify — it appears that final deals related to its on-demand service are still forthcoming. (Update: The Warner deal is done).
That being said, Pandora also announced today that the on-demand option will arrive later this year.
A report from The Wall Street Journal had said the $10 per month on-demand service will go head-to-head with Spotify, and will offer listeners access to tens of millions of tracks.
Pandora Plus, on the other hand, has a catalog of around 2 million, but it will grow larger in time, the company says.
“But for us, it’s not really quantity, but the quality of the library — of the curation around the tracks,” says Pandora VP of Product, Chris Becherer, who joined the company from the Rdio acquisition. “With these new partnerships, we’re able to take that library and do more interesting features with it.”
“The ability to replay your favorite track is something that’s not been previously available on internet radio,” he adds, as an example.
The offline listening option, meanwhile, will play a brief informational message when you lose connectivity, then seamlessly switch you over to one of your four best stations, including your personalized Thumbprint radio, and the others you’ve been listening to frequently.
Pandora’s expansion comes at a time when many consumers are turning to on-demand streaming instead of radio services. Spotify this week announced it reached 40 million paid subscribers, up from 30 million in March of this year. And relative newcomer Apple said at its iPhone 7 event that 17 million people now subscribe to Apple Music, up from 13 million reported in April.
Pandora has 78.1 million users, but only around 4 million pay for Pandora One. Its user growth has also slowed, which caused shares to fall last November following the announcement about a downturn in listenership from the prior quarter.
With the new Pandora Plus, the company believes a mid-tier will appeal to more customers. The typical U.S. consumer spends $40 to $60 per year on music, explains Becherer — paying for Spotify costs around $120 per year.
“Pandora Plus is much closer to that sweet spot of what people have traditionally spent on music,” he says.
Video Ads for ad-supported customers
In addition to the launch of the $5 per month option, the company says that it’s also now introducing new features for its existing, ad-supported option.
For example, listeners will now have the ability to have more control over their advertising experience by choosing to instead opt into a video ad. By doing so, they’ll be given the ability to skip more songs and replay more songs, as well, without having to pay a monthly fee.
This feature is similar to the previously launched “sponsored listening,” which offers the ability to temporarily eliminate ads by watching a video.
Pandora smartly targets users for these upsells by watching usage behavior. It will then determine whether to show an upsell for sponsored listening, the option for more skips and replays or even the larger upgrade to Pandora Plus, based on the user’s actions in the app.
For Pandora’s advertisers, video advertising is a means of gaining access to a more engaged, attentive audience, the company says.
This product alongside Pandora Plus will launch today and roll out to mobile device users on iOS and Android in the “coming months.” Pandora One users will transition to the new Pandora Plus service during that time frame.
For customers in Australia and New Zealand, the two new products will not launch until 2017.