Pandora CEO Tim Westergren announced in a blog post they are installing a 40 hour monthly limit on free listening via mobile devices. This, due to rising per-play content costs. Those who top the 40 hour mark will have the choice of shifting to listening via a PC, pay 99 cents for the rest of the month, or sign up for the company’s subscription service. Westergren says the move will affect less than 4% of active listeners.
Here’s the text of a post from Westergren:
February 27, 2013
A note to our listeners
This week we will begin communicating directly with a small number of our listeners as we introduce a 40-hour-per-month limit on free mobile listening.
Most of you reading this will never hit the limit. In fact, it will affect less than 4% of our total monthly active listeners. For perspective, the average listener spends approximately 20 hours listening to Pandora across all devices in any given month.
That said, limiting listening is a very unusual thing to do, and very contrary to our mission so we wanted to share a quick explanation. Pandora’s per-track royalty rates have increased more than 25% over the last 3 years, including 9% in 2013 alone and are scheduled to increase an additional 16% over the next two years. After a close look at our overall listening, a 40-hour-per-month mobile listening limit allows us to manage these escalating costs with minimal listener disruption.
For listeners who do hit the limit, we have a variety of options available to keep the music you love flowing. Listen for free for as many hours as desired on desktop and laptop computers; pay $0.99 for unlimited listening for the remainder of that month, or subscribe to Pandora One for unlimited listening and no advertising.
In short, this is an effort to balance the reality of increasing royalty costs with our desire to maximize access to free listening on Pandora. We will be sure to alert any of our listeners that start getting close to the 40 hour limit. As always, your feedback is welcome.
Thanks for listening,
RBR-TVBR observation: Back in 2011, Pandora had done the same thing–limited free listening to 40 hours per month for all listeners to its site. That was dropped for an “abuse prevention” limit of 320 hours per month. The announcement from Westergren here is understandable, given the royalty expenses, but it is a bad idea in the face of all of the competition out there for mobile listeners—especially in cars, given the recent Spotify announcement with Ford. Mobile listening is the future for Pandora and its ad revenue. Once a listener is cut off and realizes they have weeks or days before they can listen again, they will go elsewhere and may never come back. Obviously, that’s why they lifted the 40 hour limit two years ago. It’s Pavlovian—once “bitten,” the listener will listen less or not at all because they fear they’ll be cut off. How does that help Pandora’s advertisers? This is a penny-wise and pound-foolish move on Pandora’s part. If it’s only 4%, then it shouldn’t hurt the bottom line that much anyway, right?