Pandora has been slow to the subscription-content business, and it’s paid a stiff price for dallying. It announced the subscription service three months ago, then laid off 7 percent of its workforce among other cuts.
Now Pandora’s hoping the premium offering will help it compete with Spotify (with 50 million paying subscribers) and Apple Music (20 million). The existing Pandora Plus service offered ad-free streaming for $5 a month, but attracted less than 5 million of the company’s 80 million customers to pony up.
Further, Pandora Premium debuts with notable limits: it’s only available in the United States, and only on Android and iOS devices, along with Chromecast, Apple CarPlay and Android Auto. Desktop users and other streaming platforms will need to wait until later in the year to use the $9.99/month service. Pandora Plus users get six months of free access to Premium.
Pandora hopes to differentiate its service with highly relevant recommendations from an algorithm that analyzes songs along dozens of parameters. It long has been celebrated for its almost-eerie ability to find connections between songs. As well, the company leveraged assets it acquired last fall from bankrupt Rdio, further charging up Premium’s capabilities.
But let’s not kid ourselves. Pandora faces a box-full of headaches here, not least because of its slow arrival to the subscription business. Even also-ran Tidal caught a wave of energy when Sprint invested $1 billion in January.
Meanwhile, the business of subscription video content has only gotten more competitive as Netflix booms and other companies big and small crowd the app-driven interfaces of Roku, Apple TV and other streaming platforms. Subscription content, as I’ve written elsewhere, is red hot.
And even on the music side, both Spotify and Apple Music are adding video-based content, extending their brands (and all those paying customers) into an adjacent business.
Meanwhile, Alphabet’s just-announced YouTube TV represents yet another big player hoping to grab part of the subscription entertainment pie. YouTube, of course, is already the place where millions of music-related videos are seen every day.
So what will Pandora offer that will be so compelling that it can peel away subscribers from elsewhere, or, more likely, convert some of its ad-listening free customers? It doesn’t have the resources to commission lots of original content, so the Netflix/Amazon Prime path is foreclosed.
A better mix of music has some value, but truth be told, tens of millions of people already are just fine with Spotify and Apple Music. In this high-stakes poker game, launching Premium may just the table stakes for Pandora to get to play. Now to see if they have enough chips for a few more hands.