It's getting harder to make money off of music these days, and Pandora is changing its subscription model in an effort to stay profitable. The company announced on its blog that it will be hiking the price for new subscriptions to its ad-free Pandora One service.
Instead of paying $3.99 per month (or $36 a year), those who sign up for Pandora's One starting in May will pay $4.99 a month. The service provider is also removing its annual subscription option.
Existing Pandora One subscribers have nothing to worry about for now. Active subscriptions will continue to cost $3.99 a month, though Pandora does mention a price increase will not be implemented "at this time," which we think means the company intends to change that in the future. Annual subscribers who want to stay on will be migrated to a $3.99 monthly plan, which represents a 99 cent increase per month.
The reason for the price hike? Pandora cites growing costs because of increased royalty rates paid to performers. However, the company says this change should affect only 3.3 million monthly subscribers (out ot more than 250 million total registered users). The company's new fees for its ad-free option is still significantly cheaper than Spotify's $9.99 a month, although the latter's service boasts offline playback.
According to a 2011 study by NPD Group (via Recode), consumers are willing to spend between $45 and $65 per year on music, and Pandora's new prices put it in the higher end of that spectrum at $60 a year. That is still comfortably within range though, compared to Spotify's nearly $120 a year total. The same goes for similar services such as Rdio and Beats Music (both $9.99 per month).
While it is cheaper, Pandora doesn't give you as much control over what you listen to (it's more like a radio than a custom playlist setup), and it has a smaller library than the rest. If you're looking for more features, Spotify, Rdio or Beats may serve you better, but those who are cash-strapped and want a cheaper alternative will find Pandora a more affordable option, even with the price hike.