Pandora will have to negotiate new licensing deals with all the major labels while facing a growing band of competitors.
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Consumers can expect cut-rate and even free deals over the next few years as the warring entrants battle it out. While Pandora uses algorithms to generate radio stations based on its users tastes, it lacks the ability to select specific tracks that streaming services like Spotify provide.
“We’re unifying the listening experience under a single roof”, Pandora CEO Brian McAndrews said Monday in a conference call with investors. Moreover, by acquiring Rdio’s key assets that include technology and people, Pandora is planning to introduce its own “upper tier offerings” that will further compliment Pandora One.
Pandora described its latest acquisition as another step toward trying to play in other areas of the music industry. “I couldn’t be more optimistic about Pandora’s future and the future of music”, added McAndrews.
Shares in Pandora went down by 0.15 percent closing at $13.42 in regular trading, but did fall another 0.50 percent in the after-hours trading. Rdio will file for bankruptcy and shut down its service after the acquisition, attributing the sale to the “state of the streaming marketplace”.
The deal is contingent on the U.S. Bankruptcy Court in San Francisco granting bankruptcy protection to Rdio and approving the transaction.
Pandora acquired Rdio and plans on rolling out a subscription streaming service, but marketers stand to gain the most immediately from the deal. The moves are directed at getting its 78 million users to spend more time on Pandora. A substantial number of Rdio’s employees will now work for Pandora, though a few of them have been laid-off.
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“While the Rdio purchase is small ($75M cash), the move represents a massive shift from primarily domestic, ad-supported streaming to a potentially global, multi-product music offering”, Morgan Stanley analyst Benjamin Swinburne said in a research note.
