Pandora, the popular music streaming and recommendation service, has decided to shutter its 40 hour per month mobile listening limit on free accounts, effective September 1st. Although the reasoning behind the decision is vague at best, Pandora may be feeling some pressure from the upcoming release of iTunes Radio.
This isn’t the first time Pandora has lifted a cap on its content. It previously ended a listening limit in September 2011, only to reinstate it in March of this year. The most recent cap only affected approximately four percent of users, and resulted in a 10 percent decline in overall program usage.
CFO Mike Herring said that the original cap was motivated by two factors: limiting usage as a way to encourage paid subscriptions, and reducing company costs linked to royalty fees. This time around, Pandora plans to employ more “surgical techniques” to lower expenses without seriously impacting the listening experience. These methods include imposing stricter skip limits and bolstering the service’s advertising business. Although neither one of the techniques are expected to be embraced with open arms, at least Pandora’s dedicated users will be given some leeway - not cut off entirely once they reach a prespecified limit.
Despite dropping the listening cap, Pandora's CFO doesn’t believe that a sizeable jump in usage will ensue, saying, “We don’t expect a big spike in hours. We don’t expect the hours to go up.” He doesn’t think that the number of subscribers will rise, either, predicting that this portion of the business will account for 20 percent of Pandora’s total revenue.
Whether impending competition from iTunes Radio is the reason for the change or not, Herring doesn’t seem to be too intimidated by Apple, adding, “We are no strangers to intense competition.”
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