Pandora is the grandaddy of streaming music, with more than 15 years in business and more monthly listeners using it to hear tunes than anyone save for YouTube. But Pandora, a public company, has struggled to turn a profit, and has seen its user growth slow in recent years. Today it announced that it is acquiring "several key assets" from Rdio, which is filing for bankruptcy. The purchase price is $75 million, and the acquisition includes technology and intellectual property. The announcement says "many employees" from Rdio will be offered the chance to work at Pandora, implying that at least some will be out of work. Rdio's CEO, however, will not be making a move to join Pandora's ranks.
The pairing would make a lot of sense. Pandora struggles in part because its royalty rates are set by the government, something that allowed it to avoid the high costs that have battered Spotify, but soured relationships with the music labels. That in turn kept it from expanding internationally or adding more complex on-demand features.
Rdio, or at least its business model, could help Pandora transition into a more modern and global streaming music service. Rdio has long been praised for its on-demand service, but never gained the traction of its peers, especially in terms of paid subscribers. Pandora is currently available only in the US, New Zealand, and Australia. Rdio, by contrast, has a presence in 100 countries.
Pandora wants to offer radio, on-demand streaming, and concert tickets
On a call with investors today, Pandora executives explained that its goal is to become the world's biggest platform for all the ways you can enjoy music: radio, on-demand streaming, and live events. It recently completed a deal with Sony ATV that moved it closer to a friendly partnership with the music labels that it formerly had a bitter relationship with. It also acquired TicketFly, which it will use to sell concert tickets to the 78 million monthly listeners who spend more than 20 hours a month listening to music on Pandora.
The move to pair streaming music with live events mirrors moves by Spotify, which announced last week a new feature to help artists better sell concert tickets, and Tidal, which has been putting on live events starring the mega stars who are also co-owners of the business — a sort of real life version of a streaming service.
The sale is a big loss for Rdio investors
The sale is a big loss for Rdio investors. The company had raised $125 million in total and was once valued at around $500 million. The recent launch of high-profile competitors from Apple and YouTube may have been the final nail in the coffin, as the market looks increasingly difficult for stand-alone services that can't reach massive scale.
"We are proud to have created an innovative and critically acclaimed global music streaming service," Rdio said in an emailed statement. "Given the state of the streaming marketplace, we have reached an agreement with Pandora — a leader in music streaming that shares our passion for delivering the best possible music experience to music fans everywhere — to purchase key assets from Rdio's business, including intellectual property and technology."
By law Rdio is required to entertain competitive offers when it files for bankruptcy, so the planned sale to Pandora, while seemingly a done deal, will not be finalized until that process is complete. On today's investor call Pandora made clear it has no plans to keep the service running, and will launch a completely new on-demand product built in part with Rdio tech and talent. When that will launch, and how long Rdio users will be able to keep enjoying their service, is unclear. The deal is expected to close in the first quarter of 2016.