Consumers are spending more time than ever on the web these days, and one of the main reasons they use the internet today is for listening to music. In the music world, commercial success can no longer be measured by the number of albums sold in a career. Musicians measure their success now in online plays, shares, and streaming numbers. Of course, there are the numbers of tickets sold at concerts and shows, but for the most part people are listening to the top hits on the web. Marketers know this, and many have tapped into the marketing opportunities that music streaming platforms have to offer. Pandora, arguably the biggest name in online music streaming, has offered a lot to advertisers over the past few years, but it seems it has not been enough. According to a recent blog post from Pandora founder Tim Westergren, Pandora has fallen on hard times, and actions are being taken.
The blog post was created in order to announce that Pandora is now introducing a 40 hour limit each month for free mobile listeners. As one would expect, this decision was made primarily to create more paying subscribers and reduce the number of heavy free mobile users.
Now, Pandora is not simply trying to make more money for no reason, but it seems royalty costs are on the rise. Pandora’s original expectation was that they would be able to cover loyalty costs with advertising revenue, but there simply is not enough revenue coming in from advertising to match the high frequency with which heavy mobile Pandora listeners are streaming music.
Over the last three years, loyalty costs have gone up over 25 percent, 9 percent in 2013 alone. Furthermore, these loyalty costs are expected to rise over 16 percent more in two years’ time. However, this is not as devastating as it may sound, and Westergren gives us the facts to support that.
Most of you reading this will never hit the limit. In fact, it will affect less than 4% of our total monthly active listeners. For perspective, the average listener spends approximately 20 hours listening to Pandora across all devices in any given month.
That said, limiting listening is a very unusual thing to do, and very contrary to our mission so we wanted to share a quick explanation.
Although music sharing and streaming with applications such as Pandora are incredibly popular these days, the simple fact is that people stopped feeling the need to pay for music back around the turn of the millennium. It is because of that fact that the advertising that Pandora thought would keep it in the clear financially simply is not cutting it. Westergren did not mention anything about what this could mean for marketers, but it can really only go one of two ways. Either Pandora’s advertising costs will go up, or the company will not be able to offer as much advertising opportunity, as more customers subscribe for the ad-free version of the service.
To be clear, this is only for the mobile version of the service, as it is the primary platform for Pandora listening.