Pandora Media (NYSE: P) has finally done something it has long resisted.
The company, which made its name as a personalized streaming radio service powered by an intuitive recognition engine, has launched a traditional subscription-based music service. The move puts the company into a more direct competition with Spotify, Apple Music, and a handful of other major online players.
Previously, Pandora users had two options: a free service that came with ads and limited how many songs could be skipped in an hour; and the $4.99 a month Pandora Plus, which dropped the ads and allowed more skipping. Neither of those allowed people to actually pick which specific songs they wanted to hear. Instead, Pandora served up selections based on the likes or dislikes of the individual user, as well as those of people who enjoyed similar music.
Pandora will still offer those products, but for $9.99 a month, subscribers to its Premium service will get to pick songs. It's a me-too move (though the company says its recommendation engine makes it better than what's on the market), but it's one Pandora likely had to make given consumer demand.
"Every day tens of millions of people trust us to choose the exact right songs for them. That's why they spend more time with Pandora than any other music service," said CEO Tim Westergren in a press release. "With Premium, we're leveraging our immense trove of data and everything we've learned about personalization to offer a listening experience that sets a new standard for what a music service should be."
Why is Pandora doing this?
When the company first launched, the streaming music space was less crowded, and all-you-can-play services existed, but had not become the norm. Then the game changed: Major companies entered the space and made the idea of owning music much less relevant by offering access to massive song libraries for a monthly fee.
In some ways, that shift made Pandora's personalized radio service, which was once very forward looking, seem like just a variation on the antiquated idea of radio. Basically, in a market where people can listen to nearly any song they want whenever they want to hear it, attempting to draw consumers to radio stations -- even really intuitive ones curated personally for them -- was ultimately going to prove a difficult business model.
Will this work?
For existing Pandora customers who had subscribed to another all-you-listen music service or ones who had resisted paying for music, this has potential. The company knows a lot about its customers, and it can do some pretty clever things like automatically putting any song they've given a thumbs up to into their library. That, plus other technology like being able to create a "smart" playlist by picking a couple of songs, while Pandora fills in the rest, should drive some signups.
Pandora is late doing this, but the move should increase revenue from its current customers, and will probably attract some new ones.
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