Pandora subscribers will be sad to see the incoming price hike in subscription fees over the upcoming year, following a government decision that will require the company to pay more royalties to artists.
The federal board decision was modest in the increase, at least to what most investors were expecting it to be, leading to an overall net gain for Pandora, at least for now. Stocks went up in excessive of 15 percent following news of the decision, which many expected to be much worse.
Lobby group SoundExchange, which represents record companies and artists, had been petitioning the Copyright Royalty Board for a 10 cent increase to the licensing rate for 100 songs, while Pandora asked for a decrease of 3 cents. Ultimately, the board determined an increase of 3 cents was appropriate, bumping the rate up to 17 cents for every 100 songs, up from 14.
While not as devastating to the company as a 10 cent hike would have been, Pandora will be impacted enough that it will have to pass on the price hike to consumers in the new year. Not only will the company be forced to eliminate the annual subscription option, but an increase of $1.00 a month to its monthly subscription has been announced.
According to Fortune, even though the stocks increased in light of the decision, Pandora’s shares are down overall this year, by as much as 50 percent since its peak in February.
Pandora will continue to be the most affordable option of the popular music streaming services at $4.99 per month. Competitors Spotify and Beats Music both offer music streaming for $9.99 every month.
The Verge reported an interesting fact about Pandora’s source of income. In 2013, nearly half of the company’s revenue went to pay for its music licensing. Of the remaining half of income, the company made four times more money from ad revenue from its free service compared to the monetary gains from subscribers.
