In a bid to compete with Spotify and Apple Music, Pandora is acquiring key technology and staff from Rdio, and will be launching an on-demand, subscription-based music service that provides customers with more control over their music.
Pandora will pay $75 million for Rdio's streaming music platform and intellectual property, but not the operating business. Rdio will file for bankruptcy and eventually shut down its service.
"Rdio's service will not be interrupted today," the company said in a blog post. "We will have more updates in the coming weeks on what this process means for your Rdio account, but for the time being the service continues unchanged."
Some Rdio staff will move to Pandora after the deal closes.
Pandora expects to roll out an expanded listening experience by late 2016. "The music industry's brightest future lies in monetizing the entire spectrum of music listening; from ad-supported Internet radio to full on-demand paid subscription," Brian McAndrews, chairman, CEO, and president of of Pandora Media, said in a Monday conference call.
Pandora is known for Internet radio, serving up stations and songs based on your listening habits and preferences, and allowing users to give songs a thumbs up or down in order to improve accuracy. But services like Spotify and Apple Music allow people to pick and choose the songs they listen to and build playlists, in addition to Internet radio, so it will likely be hard for Pandora to compete with only an Internet radio option going forward.
The company also needs that extra subscription revenue. Right now, the commercial-free Pandora One is $4.99 per month, while Spotify and Apple Music charge double that for their offerings.
Pandora, however, must still secure licensing deals with music labels. "We are engaged in productive conversations, but expect this new approach will take some time to fully materialize. And there is no guarantee that all potential partners will want to join us," McAndrews said.
After years of back and forth with labels (and Congress) over royalties, Pandora recently coughed up $90 million to gain access to pre-1972 recordings from Sony, Universal, Warner, and Abkco. A lawsuit filed against the company by the band The Turtles is still pending, but McAndrews said this week that the recent deals are "big steps forward in establishing a foundation of trust and good faith with the industry."
Just a few months ago, Rdio added nearly 500 live broadcast radio stations to its free and paid tiers in the U.S. The new feature also includes sports content, as well as the ability to favorite, share, or start a custom station based on a song.