Pandora Ends Cap on Mobile Listening

Streaming service also adds sleep timer, limits song skips per day

The Pandora Media Inc. logo.
Andrew Harrer/Bloomberg via Getty Images
August 23, 2013 3:00 PM ET

Pandora is loosening its mobile listening cap while introducing a new feature — and a new restriction. The streaming service will end its limit on mobile listening on September 1st, according to Billboard; the cap was introduced this past February in an effort to reign in royalty costs tied to the service's most active mobile users. However the cap caused a drop in listening hours, with a 12 percent fall recorded this past April.

Read Pandora's Response to Pink Floyd's Royalty Accusations

The cap's effects are clearly reflected in Pandora's royalties and subscription finances. Pandora spent 52 percent of its revenue on royalties in the second quarter, compared to 59.8 percent in the same quarter the prior fiscal year. Meanwhile, subscriptions and non-advertising revenue grew, accounting for 18.3 percent of total revenue (compared to 11.7 percent a year before). But Pandora's net loss grew 44 percent to $7.8 million – a result of growing sales and marketing expenses. The company burned 29.1 percent of its revenue in the second quarter in those areas, compared to 23.2 percent a year earlier.

Though Pandora is ending the mobile listening cap, it's also introducing a new limit on song skips. The six skips per station per hour — a limit required of all DMCA-compliant non-interactive webcasters — still stands, but now Pandora will cap song skips to 12 in a 24-hour period. The service is also adding a new "sleep timer" feature that will turn off the tunes after a preset period of time.

Pandora Clashes With Musicians Over Song Payments

Both additions look to help curb costs as Pandora ends its mobile listening cap, with CFO Mike Herring citing "the continued strong growth in our advertising revenue" as the big reason for the company's moves. Pandora's mobile advertising RPM — or revenue per thousand listener hours — has shown growth, reaching $33.90 in the second quarter from $23.23 in the first quarter, and $23.51 in the fourth quarter of the previous fiscal year.

Pandora has been dealing with headaches regarding musicians and artists' royalties: Billy Joel, Rihanna and Missy Elliott were among 125 musicians who signed a letter in November 2012 against the streaming service's attempts to change to change the way artists are compensated through the "Internet Radio Fairness Act." As Billboard notes, the act stalled out.

In June, Pink Floyd went after Pandora, accusing the company of trying to rip off artists. Pandora responded that the band was given "badly misleading information." Pink Floyd unlocked their catalog on rival streaming platform Spotify that month through a special promo campaign.

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