Digital Media

Pandora on-demand is on its way, via Universal, Sony deals

Pandora clears two major hurdles before launching a service similar to Spotify or Apple Music, but it still lacks a pact with the third major label, Warner.

Pandora has nearly cleared its path to an on-demand, paid music service, announcing licensing deals Tuesday with two of the three major music labels.

The online radio service said it has secured agreements with Universal Music Group, the biggest record company in the world, and Sony Music Entertainment, as well as a preponderance of independent labels through various deals.

Warner Music, the third of the Big Three labels, is absent from the announcement. Other major absences included pricing and other details about the coming service itself and global rights. Pandora said the pacts announced Tuesday apply to its business in the US.

But deals like these are the final hurdles separating Pandora from its long-standing goal of launching an on-demand service like Spotify or Apple Music, to complement the radiolike, webcasting Pandora has dominated for a decade.

Such a service would bring Pandora into the modern realities of the music business. The rapid-fire growth in subscription, all-you-can-eat services in the last two years has made that the presumed default model for music sales going forward. But Pandora's restrictions -- on what songs listeners can hear, how much they can skip and what countries it can stream to -- have hobbled it while younger rivals race ahead.

In addition to pacts with Universal and Sony, Pandora widened its partnership with Merlin Network, a digital rights agency that represents thousands of independent labels. Pandora first struck a deal with Merlin in 2014. It also secured separate deals with more than 30 other independent labels and groups, it said Tuesday.

"This was a truly collaborative attempt to find a solution that would support artists while profitably growing our respective businesses," Tim Westergren, Pandora's founder and CEO, said in a statement.

Pandora had 78.1 million active listeners, as of the end of June. It has long operated a paid version that removes advertising for $5 a month, but it still has restrictions on song choice and skips; that has never been a large part of its business.

By comparison, Spotify's most recent numbers put paid subscribers at 39 million paid subscribers and total listeners above 100 million listeners total. Apple Music, which differs from Spotify and Pandora by lacking a free option besides an introductory no-cost trial, hit 17 million paid members.

During a conference call Tuesday morning, Westergren said the company was having "constructive conversations" with Warner and hoped to include Warner's artists in its subscription launch. Warner artists include Coldplay, Metallica and Ed Sheeran.

Executives also said the company plans to flesh out its subscription service first in the US, the biggest music market in the world. The service will make its current $5 subscription much more flexible and should include a higher-cost on-demand service, more typical of rivals, the company said. That could set Pandora up to launch operations internationally later, but Tuesday's deals are only for the US, Pandora said on the call.