Streaming music biz Pandora will raise the price of its One subscription service, blaming a jump in royalties it has to pay out to record labels.
The company on Wednesday said that it will raise the cost of its online service from $3.99 per month to $4.99 for new users. Pandora said that current users will not be subject to the price hike for the time being.
The increase, it's claimed, is a reflection of rising licensing costs Pandora must pay labels for streaming their tracks over the internet. The company said that a content licensing deal it maintains with royalty collection firm SoundExchange has seen prices escalate by 53 per cent over the last five years. Additionally, Pandora claims that SoundExchange will raise rates another nine per cent by the end of next year.
As such, Pandora said it has to up the cost of its One subscription service, which was launched in 2009 and pipes songs to users without advertisements interrupting the stream. Users not wishing to pay the monthly fee can opt for the free Pandora service, which occasionally broadcasts ads between tracks.
Pandora – based in Oakland, California – claimed that it has 3.3 million subscribers on the One service. The free Pandora option boasts more than 250 million registered accounts.
Royalty fees have long been an issue of contention between Pandora and the record companies. The streaming music service has fought labels over what it claimed where prohibitively high costs for every song it streams, and in 2008 the two sides agreed to a settlement in which SoundExchange would collect royalties from Pandora on behalf of artists and labels.
Critics of the web biz have charged that the company in fact short-changes rights holders and pays minuscule fees to stream songs compared to other broadcasters.
"A business that exists to deliver music can't really complain that its biggest cost is music," psychedelic Brit band Pink Floyd told to the company last year in a protest over payments. "You don't hear grocery stores complain they have to pay for the food they sell."
Pandora, which opened its doors in 2000, also announced that its chief technology officer, Tom Conrad, will be leaving the company. A 10-year veteran of the biz, Conrad will step down from his post but remain with Pandora in an advisory role. Vice-president of engineering Chris Martin will take over the CTO position. ®