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Pandora raises fee for ad-free music service

Pandora has signed its first-ever direct licensing deal

Pandora has signed its first-ever direct licensing deal with artists representative Merlin, both companies said Aug. 6, 2014. Pandora executives ring the opening bell at the New York Stock Exchange on June 15, 2011, the day the company went public. Credit: AP

SAN FRANCISCO - - Pandora Media Inc. will increase fees for its ad-free service by $1 a month to almost $5 a month in May, a move to cover the rising cost of licensing tunes that may annoy some longtime fans of the popular music-streaming service.

The company, which streams music from virtual radio stations to mobile devices such as Apple's iPhone or Google Android smartphones, said in a Tuesday blog post that royalties paid to artists have risen 53 percent over the past five years and will rise another 9 percent in 2015.

The increase of $1 to $4.99 a month takes effect for new subscribers in May. Existing monthly subscribers will not be forced to accept the higher charges for now, it said without elaborating.

Annual subscriptions will be discontinued however. Yearly subscribers paying $36 a year currently will move to a monthly loyalty plan of $3.99, once their memberships expire.

Pandora said the fee hikes should affect an estimated 3.3 million listeners, out of 250 million registered users, the bulk of whom tune in to the free, ad-supported service.

"The costs of delivering this service have grown considerably," Pandora said in a blog post on Tuesday. "We hope that you understand why we have taken these steps. Our goal is to continue to be your go-to Internet radio destination."

Pandora is already one of the world's most popular streaming music services though it has plenty of competitors, including Spotify and Apple's iTunesRadio. It's also aggressively investing in local sales forces to sell ad spots and on expanding its 4-year-old service.

The company said that active listeners in January fell to 73.4 million from 76.2 million in December, due to normal seasonality.

However, year-over-year active users were up 12 percent, the company said.

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