Pandora moves into world of on-demand music

NEW YORK: Since it began 10 years ago, Pandora Media Inc has been focused on one corner of the digital music universe: internet radio. Now, it is also moving into the world of on-demand music, competing directly with outlets like Spotify and Apple Music.

Pandora announced on Monday that it intended to acquire the assets of Rdio, a highly regarded but struggling online service, for $75 million in cash.

The deal — which requires Rdio to go through bankruptcy — could reshape the already competitive landscape of online music by letting Pandora greatly expand the way it delivers music to its more than 78 million customers, the majority of whom listen free.

Instead of Pandora users being limited to a feed of songs that are tailored to their tastes, but over which they have limited control, Rdio’s technology would enable Pandora to let customers hear exactly the tracks they choose.

The deal may also help Pandora satisfy the demands of Wall Street.

After the company announced its quarterly financial report last month, Pandora’s stock fell 35% in one day. Analysts expressed concern over how much Spotify and Apple Music had begun to curtail Pandora’s growth.

“This is a way for Pandora to supplement its growth trajectory with other business models within digital music,” said Anthony DiClemente, a media industry analyst with Nomura Securities.

Pandora’s plan for Rdio’s assets follows a string of other deals in recent weeks that have begun to transform the company.

In October, Pandora paid $450 million for the online ticketing company Ticketfly, and last week Pandora struck a licensing deal with Sony/ATV, the largest music publisher, while hinting that the deal would help it substantially expand the way it delivered music to its customers.

“Viewed individually, these are logical investments in our future growth,” Brian McAndrews, the chief executive of Pandora, said in a conference call with investors on Monday.

“But when viewed collectively, they are key parts of a truly transformative vision of our future, positioning Pandora to become the definitive source for music enjoyment and discovery globally.”

Rdio was founded in 2010 by the creators of Skype, and it has been praised for its social-media features and clean design. Like Spotify, it charged customers $10 a month for on-demand access to songs, and had limited, radiolike features available free, with advertising.

But even as it has expanded around the world, Rdio has stalled in the marketplace.

The company has never said how many users it has, but music executives estimated the audience to be far lower than that of Spotify, which has 75 million users around the world, 20 million of whom pay.

In 2013, Rdio had an implied value of $500 million, after the radio company Cumulus Media Inc took a 15% stake in its parent company in exchange for $75 million of promotional commitments over five years.

Last week, Cumulus said it had written down substantially all of the investment it had made in Rdio.

As part of the deal, Rdio will declare bankruptcy and discontinue its service worldwide, the companies said. Pandora would then acquire “several key assets” from Rdio, including technology and intellectual property, and would hire some of Rdio’s employees.

Anthony Bay, Rdio’s chief executive, would not join Pandora, McAndrews said on the conference call.

In a statement, Rdio noted, “While we are filing for bankruptcy because the planned sale to Pandora is contingent on such a filing, by law Rdio is required to entertain competitive offers during the bankruptcy process that is being managed for us by Moelis & Company.”

Pandora said it hoped to add on-demand music to its service by the end of 2016.

But even after buying Rdio’s technology, it still faces another hurdle: negotiating new licensing agreements with the major record companies, with which it has long had a combative relationship.