Pandora's latest buy sets it up to play the exact song you want

Pandora agrees to buy most of smaller streaming service Rdio for $75 million in cash, which clears the way for the online radio giant to let you listen to the specific track you want to hear.

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Joan E. Solsman
2 min read

Online radio giant Pandora says it will offer an expanded "listening experience" by late 2016.

Richard Levine/Demotix/Corbis

You heard right. Pandora wants to play just the song you ask it to spin.

The online radio giant on Monday said it will buy most of smaller rival Rdio for $75 million in cash. As a result, Pandora plans to roll out new services next year that include on-demand listening.

The deal underscores the pressure Pandora, the Internet's biggest streaming music source, feels as listeners gravitate toward rivals such as Spotify and Apple Music that let people listen to the specific tracks they want to hear. Spotify's 75 million listeners as of June are a stone's throw from Pandora's 78 million in September. With the purchase of Rdio, Pandora hopes to break out of its current model, which has always prevented people from picking the exact songs it plays.

"There are listeners who want to have both," said Chief Executive Brian McAndrews on a conference call, referring to the choice between free listening with ads and subscriptions that offer more perks, like stripping out commercials and playing specific songs on-demand. "Why encourage them to go elsewhere?"

The deal with Rdio isn't an outright takeover. The Oakland, California, company is buying Rdio's technology and intellectual property, as well as hiring many members of Rdio's team. The deal requires Rdio to seek bankruptcy protection, and Pandora isn't acquiring the actual operating business of its smaller competitor.

The licenses a tech company cobbles out with labels and other music rights' holders are fundamental to the kind of music service it can provide. Rdio's direct deals for its music catalog won't transfer to Pandora, which is typical for a change in control like this. Still, Pandora said it expects to offer an "expanded...listening experience" by late 2016, which includes radio, on-demand listening and live events.

Pandora has already made several moves in that direction. Last month, the company agreed to buy online ticketing agent Ticketfly for $450 million, which eventually will let listeners buy concert tickets through Pandora. It has secured more direct licensing agreements like one this month with Sony/ATV, a major music publisher with songwriting rights for artists like Beatles and Taylor Swift, and another last year with Merlin, a group that represents thousands of independent labels. These direct deals give Pandora more control over the tracks its plays and warms its relations with the music industry, after years of adversarial standoffs.

Pandora isn't saying exactly what its expanded listening experience will be, yet. Executives said it will give competitors a run for their money, touting the strength of Pandora's data about listeners' tastes and its smarts about what to play for them.

"We know what people want to hear," said Mike Herring, Pandora's financial chief. "We can get them up to speed quicker, build libraries, build playlists using our recommendation technology in a way that's far superior to what's on the market today."

Spotify declined to comment. Apple couldn't immediately be reached for comment.

Pandora shares inched up 0.2 percent to $13.45 in after-hours trading.