Back in February, Pandora put a cap on the free mobile listening service. This cap was set at 40 hours per month. If mobile users went over that limit, the charge was ninety-nine cents. The other alternative was to stick to listening to Pandora on a desktop. For obvious reasons, this upset many Pandora users. Today, Pandora has lifted that limit.
On September 1st, Pandora will no longer limit mobile listening to 40 hours per month. The company told press that it is going to try and cut costs elsewhere, and that the company is responding to customer wishes by lifting the cap. Why did Pandora bother with the cap in the first place, and what will change going forward? Here are the details.
Pandora's Reasoning Behind the Cap
When Pandora announced the 40-hour per month cap, the company stated that high royalty rates were making it tough to turn a profit. That's why Pandora put the cap into play to begin with. So what's changed? In one word: advertising. Pandora claims that a successful advertising campaign has made up for those royalty rates.
This all sounds well and good, but there are a few problems with this scenario. First, advertising isn't exactly steady, and analysts don't expect Pandora's advertising to keep climbing (the opposite, in fact). Second, Pandora is (and has been) in some hot water with musicians and music companies, and that might mean that things about to get shaky for the company.
What will happen to Pandora listener rates if ad sales slip? Or, what happens if Pandora can no longer operate on the same scale because of musician arguments? All signs point to a sinking ship, if any of these things occur, but Pandora will likely try to find a way to combat all of these troubles before it is too late.
If you do use Pandora's free version, you can now listen from a mobile device without worrying about that measly ninety-nine cents if you go over 40 hours per month (a cap that Pandora claims only impacted 4% of users). But, you may have to worry about the future success of the company if Pandora's advertising doesn't pick up, or if the company can't settle royalty issues.
An Interesting Conclusion
Pandora claims that royalty rates are too high. Yet, musicians argue that Pandora is ripping them off. This is an interesting conundrum. There's another curious fact here too. Pandora originally put a listening cap on the desktop version of the service when the company first began. Back then, desktop listeners were cut off after 40-hours, but that cap was lifted in 2011.
Pandora should be careful when it comes to toying with listeners. Instilling caps, lifting those bans, and then playing around with advertising numbers isn't something that listeners are going to like too much (especially since Pandora has some tough competition coming soon). At least, for now, the ban has been lifted, so you can listen to Pandora from your mobile device without worrying about spending an extra dollar.
Photo Courtesy of Zach Klein via Flickr Creative Commons