Pandora price hike is coming in May

Pandora will be raising its subscription fees for the first time ever in May after a federal judge ruled that the Internet music streaming service would be subject to a higher royalty rate than traditional radio stations. Pandora One will cost subscribers up to $60 per year. 

Pandora, an internet music streaming service with hundreds of millions of users, has had a rough week. On Tuesday, the service announced a shake-up in its leadership, with former Chief Technology Officer and Executive Vice President of Product Tom Conrad stepping down after nearly ten years at Pandora.

Then on Wednesday, a federal judge said that Pandora would be subject to a higher royalty rate than traditional radio stations. The latter bit of bad news will probably have a bigger affect on Pandora listeners, as the service announced Tuesday that it will raise its subscription fees for the Pandora One service for the first time in May.

Get Ready to Pay Up to $60 for a Year of Pandora

The Pandora changes are two-fold. First off, the company is doing away with its annual subscription plan entirely, which had cost $36 per year. "Existing annual subscribers that remain active will migrate to a discounted loyalty price of $3.99 per month at their next renewal period," according to a Pandora blog post on the rate changes. That means current users with annual memberships will start paying about $48 per year to use Pandora — $12 more than before.

Active monthly subscribers who are already enrolled with Pandora (or who enroll before the May deadline) will get to keep their current rate of $3.99 — for now. Once May rolls around, new subscribers will have to sign up at the higher monthly rate of $4.99, which comes to about $60 a year.

Increased Royalties to Blame for Rate Hikes

Pandora places the blame for the $1 rate hike on higher royalty rates being charged by the music industry: "For example, the royalty rates Pandora pays to performers via SoundExchange for subscription listening have increased 53% in the last five years and will increase another 9% in 2015."

The Wednesday ruling mentioned above would seem to back up Pandora's claim. Traditional radio stations only have to pay the American Society of Composers, Authors and Publishers (ASCAP) a royalty rate of 1.7%, but a federal judge denied Pandora's request to pay the same rate. However, as Engadget points out, the ruling only forces Pandora to pay "the same 1.85% royalty rate that it has paid for years," so the ruling was hardly a new loss for Pandora.

Readers, how will this rate hike affect you? Current subscribers won't see a rate hike (yet), but will you stick around if your subscription increases? Or do you prefer dealing with ads to paying for music? Give us your take in the comments below!

Marcy Bonebright is a features writer for Dealnews.com, where this article first appeared: http://dealnews.com/features/Face-the-Music-A-Pandora-Price-Hike-is-Coming-Your-Way-in-May/1009044.html