In a move that will affect less than 4% of its users, Pandora announced yesterday that it will begin limiting listening on mobile devices to 40 hours a month. As they approach that limit, the listener will hear from Pandora, and be offered a couple of options. They can choose to pay 99 cents for unlimited use of the service for the rest of the month, or they can sign up for Pandora One for $3.99 a month, which gives them unlimited, commercial free listening to the service.
In a blog post yesterday, Pandora founder Tim Westergren explained that ” this is an effort to balance the reality of increasing royalty costs with our desire to maximize access to free listening on Pandora.”
In addition to helping cover royalty and other expenses, this will get the attention of the heaviest users of Pandora. I’m sure Tim would like to mobilize those listeners to help persuade their congressional representatives to pass the Internet Radio Fairness Act. As he points out in his post, “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.”
It’s a strategy that could work well for Pandora, as they could win in one of two ways, either by inspiring their most dedicated listener base to join them in lobbying Congress, or by converting a portion of those listeners to paying subscribers. It’s also a move that may please investors, who have been concerned about Pandora’s ability to monetize mobile impressions.
All in all, this is sounding like a pretty good strategic move..