Pandora is working hard on launching its new on demand subscription service to better compete with rivals like Spotify, Tidal and Apple Music. The company hopes the new paid streaming tiers will help it turn profitable after reporting big revenue gains for Q1 amid wider losses.
Pandora is looking toward the future with a new paid streaming service that it hopes can help the company to compete with rival streamers. While Pandora offers a paid tier on its current radio service, the vast majority of users remain on the free tier. The company survives mainly on advertising revenue, which posted a healthy gain in the just-released numbers for Q1, and helped the stock shoot up 11 percent in value after the recent earnings call.
New Pandora CEO Tim Westergren focused on the company's increased revenue growth and subscriber base and de-emphasized its widening losses, which increased from $20.9 million to $57.4 million year on year for Q1. Westergren said projected total revenue for the company's radio service in 2016 was expected to top $1 billion.
Still, 58 percent of that revenue is being paid directly to holders of the music rights to the songs that Pandora plays. The company has acknowledged that the way to turn its losses to a profit lies in on demand streaming, and made it clear that the launch of its version of a paid service to rival Spotify, Apple Music, Tidal and others was being fast-tracked and should be available by year's end.
The promised on demand service was heralded as a reinvention of the concept, as opposed to a mere copy of its rivals' streaming models. Several payment tiers will exist within the structure of the service.
"There is a spectrum of pricings and offerings that we would like to bring to the market," said company CFO Mike Herring.
In order to launch the new product, Pandora must first secure licensing deals with all the major record labels. Westergren assured investors that this was in the cards, and he has already begun preliminary discussions with label heads to get them on board.
Pandora has also pledged that its current free radio service will continue alongside the paid on demand streaming offering once it launches. Meanwhile, rumors are still flying that Pandora may be in talks to sell the company, though Westergren remained mum about that possibility.
