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Pandora One hikes subscription price, nixes annual option

Because of a rise in royalty rates paid to musicians, all new subscribers to the streaming music service's premium option will have to pay a dollar more per month than existing users.


Pandora is making a few changes to its premium streaming music service -- most notably a fee hike for new monthly subscribers.

The company announced Tuesday that because of rising royalty rates it pays to musicians, it's having to up its monthly fee for the first time since Pandora One debuted in 2009. Starting in May, new members will have to pay $4.99 per month rather than the current rate of $3.99 per month.

"The costs of delivering this service have grown considerably," Pandora wrote in a blog post. "For example, the royalty rates Pandora pays to performers via SoundExchange for subscription listening have increased 53 percent in the last five years and will increase another 9 percent in 2015. In order to continue to provide an ad-free listening option, we are implementing some changes to the way we price Pandora One."

Pandora One is the company's premium version of its steaming radio service. Initially, the service cost $36 per year and then later a $3.99 per month option was added. With this new price hike, Pandora is also getting rid of the annual option. So, users will now only have the pay-per-month option.

While Pandora is increasing its price for new users, existing users that stay active can keep paying $3.99 per month. And those annual subscribers that remain active will be migrated to a "discounted loyalty price" of $3.99 per month with their next renewal.

Since the hike won't become effective until May, those people who want to get in for $3.99 per month can sign up for Pandora One before the increase.

Only 3.3 million of Pandora's 250 million registered users are Pandora One subscribers; so, Pandora said this raise in fees is only affecting a small portion of its listeners.

The music streaming business is becoming increasingly more competitive. Smaller companies, like Spotify and Rdio, have entered the fray, along with tech giants like Apple, Google, and even Amazon is reportedly working on its own streaming service. Despite the tough competition, Pandora is still way ahead of the pack with 31 percent of the US streaming music service market share, according to a recent survey by Edison Research.