Pandora Media has reduced free mobile listening hours to 40 per month in order to cope with the rising royalty costs.
Pandora Media Inc. is a free U.S. online music streaming company allowing music lovers to listen to their favorite tracks on their mobile phones. However, the company recently announced that it will be reducing the free listening hours to 40 hours per month. The move comes at a time when the company is struggling to cope with the fast rising royalty costs.
Pandora depends largely on advertisements for revenue and this has curbed its growth. Serious competition from similar companies like Sirius XM Radio Inc hasn't helped their cause either.
According to a blog post on the company's website by co-founder Tim Westergren, Pandora's per track royalty rates have increased by more than 25 percent over the last three years. In 2013 alone, the company witnessed a 9 percent increase and predicts another 16 percent increase over the next three 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," he said.
Pandora hopes that the passing of the Internet Radio Fairness Act by U.S. lawmakers could help them revive some business as it will change the rules and regulations on how royalties are paid to artists.
Pandora currently pays a different rate to license music than traditional radio companies. Although most of Pandora's music is heard through mobile phones, the company still pays out the same royalties as desktop listening, reports the New York Times.
This new limitation will be put into effect this week and the company said that it will notify users when they near their limited 40th hour.