Pandora Debuts New Radio Service in Bid for Paying Customers

(Bloomberg) -- Pandora Media Inc. introduced a new paid version of the world’s most popular online radio service Tuesday as part of an effort to convert free users into paying subscribers.

Called Pandora Plus, the ad-free service will cost $5 a month, and offer three of the four features most requested by users, Pandora Chief Financial Officer Mike Herring said in an interview. Customers will be able to replay songs, skip more songs and listen offline -- but won’t be offered songs on demand.

Separately, Pandora on Thursday announced a new U.S. licensing agreement with Warner Music Group. That follows the company’s Sept. 13 announcement of accords with Sony Music, Universal Music and dozens of other independent labels and distributors.

Pandora amassed a base of 78 million users with its free service, which offers online radio stations customized to a specific users’ tastes. The pace of user additions has stagnated and sales growth has slowed, so the company is looking to more complex paid services for revenue. 

Pandora Plus is one of two subscription products the company plans to introduce this year, along with a service offering millions of songs on demand, akin to Spotify. The new features for Pandora Plus and the subsequent pay service address “areas where people hit a barrier to Pandora and go somewhere else,” Herring said.

Pandora already has four million subscribers to its current paid radio service, Pandora One, which offers the main radio product without advertisements. Those customers will now be subscribers to Pandora Plus.