Pandora's ad-free music subscription fee is going up due to enormous hikes in royalty costs over the past years.
Pandora, the biggest online radio service, announced Tuesday that it is making a price change to its ad-free subscription for some users. The company is increasing the Pandora One subscription rate by $1 for new customers starting May, charging $5 a month. The change, however, will not affect existing subscribers paying $3.99 a month, but a price hike is eminent in the future. According to the official blog, Pandora is also ending the annual-based subscription for both new and existing customers, by automatically shifting annual subscribers to a monthly $3.99 plan upon renewal.
Pandora, which streams music from virtual radio stations to mobile devices including Android smartphones and Apple iPhones, said the new change follows increased royalty costs over the years. According to the company, royalties paid to artists increased 53 percent over the last five years and is expected to rise another 9 percent next year.
New customers signing up for the service before May will pay the company's usual $3.99 a month.
"Beginning this week, annual subscribers approaching their renewal date will be notified as the update is applied to their subscription," the company said. "Monthly pricing for new subscribers will take effect in May, allowing time for new subscribers to take advantage of discounted loyalty pricing if they subscribe before then."
The price hike to cope with the increasing royalty costs follows the company's previous attempt last year. Pandora reduced free mobile listening hours to 40 per month, a move to battle the ever-increasing royalty costs.
Pandora's extensive network gives it an upper hand compared to other rival music streaming services. The competition is growing enormously with new entries like Samsung's Milk Music launched earlier this month, Apple's iTunes Radio and old players like Spotify.
The California-based online radio service said the fee hike will only affect an estimated 3.3 million listeners out of its massive 250-million network of registered users. Majority users of the Pandora music service tune in to free, ad-supported service.