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Spotify Challenges Pandora in the U.S.

Spotify has made the jump across the Atlantic to the United States.Less than one month after personalized radio site Pandora conducted its initial public offering, the online music market has gotten a good deal more competitive. Wired reports that European music streaming site Spotify has finally made its U.S. launch, after two years of planning.

Like Pandora, Spotify offers free music streaming on a variety of platforms supported by ads, with the option to pay $5 per month to avoid them or $10 to add features like offline storage.

Pandora, however, only allows a limited amount of control over the music being heard, instead using a recommendation engine to create personalized radio stations, while Spotify allows users to listen to any song in its library as desired.

Spotify also allows unlimited monthly listening, compared to 40 hours free per month on Pandora.

While immensely popular in Europe, Spotify took some time to migrate to the U.S. because of the more challenging licensing environment.

“Obviously we had to secure rights in this market,” Ken Parks, chief content officer and managing director of Spotify, told Wired. “Spotify is really serious about the model that includes a really free experience, and we were keen that we preserved that intact when we came to the United States.”

The company’s efforts have proven successful, as the U.S. version carries over the millions of titles available in Europe. The platform also maintains its rapid response time, which regularly beats even music players like iTunes.

Wired still notes some flaws in the system that could be exploited by Pandora, particularly its weak recommendation engine, but ultimately the site could prove to be an insurmountable challenge for the current leading music site.

Pandora conducted its IPO on June 15 and CNET noted that the company saw some quick success early on, with shares rising as high as $25 in the first day from the initial price of $16. Since then shares have mostly remained between $16 and $20, with a brief dip below $13.

At 12:00 PM Thursday, June 14, Pandora had fallen 4.96 percent to $17.04 per share.

CNET spoke with industry experts on the company’s prospects and many agreed that the costs per song Pandora was forced to pay made profitability unlikely when based exclusively on ads. Apple dominates the market by accepting poor returns in order to sell hardware, but ad-supported music services have shut down regularly in recent years, making the competition from Spotify all the more deadly for Pandora.

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