The Changing Landscape of Digital Music

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4Q 2014 | IN-1020588


Freemium Strikes a Chord with Music Services


Pandora ended its annual subscription tier, which either pushed these subscribers to monthly plans or the free, ad-supported model. For Pandora, however, this wasn’t a terribly weighty decision, since these users typically generated the royalty/streaming expenses for the company, plus subscriptions only accounted for around 20% of revenue, which, at prevailing subscriber rates (US$5 per month, with some annual subscribers moving to a “loyalty plan” at US$4 per month), was roughly 3 to 4.5 million subs. But other services are also looking to maximize the ad-based model as well.

Rdio recently launched a freemium (ad-based) service to complement its subscription-based plan (US$9.99 per month). The move is intended to better compete against Spotify, which has 10 million subscribers and 30 million free listeners, and other free radio services like Pandora, Milk, Slacker Radio, and iHeartRadio. While Spotify earns most of...

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