Rdio offers $3.99 streaming tier
The option lets users listen to stations ad-free and keep up to 25 songs at a time.
Digital service Rdio thinks it knows what most people are willing to pay for streaming music — the price of one latte a month.
The company (name pronounced “Ar-dee-oh”) on Thursday introduced a new version of its service that costs $3.99 a month, a deep discount from the industry standard of $10 a month.
Rdio, which has struggled to make its mark on the fast-growing online music market, is hoping it can find its sweet spot to take on industry leaders Spotify and Pandora.
Rdio already has a $10-amonth music service that gives subscribers access to its 35-million-song library, and a free ad-supported version with Pandora-like stations. Users of the new tier, dubbed Rdio Select, will be able to stream Rdio’s radio stations without commercials. They can also download and keep up to 25 songs at a time for on-demand and off line listening.
To explain the reasoning for the new price point, Rdio Chief Executive Anthony Bay points to a 2013 study that found iTunes users spend an average of $40 a year on music — the equivalent of just four album downloads.
“There hasn’t really been a subscription service targeting that,” he said. “[$10 a month] is the business class of the streaming plane. We haven’t had coach yet.”
That’s not strictly true. Rdio Select is similar to Internet radio company Pandora’s paid version, Pandora One, which costs $5 a month for ad-free listening but doesn’t offer the ability to download or keep tunes. Rhapsody also has a $5 monthly program called unRadio, while tech company Samsung has a $4-a-month service called Milk Music for its mobile devices.
Pandora’s subscription revenue totaled about $54 million in the first quarter of the year, or just 23% of its total sales. Pandora One most recently counted 3.8 million subscribers.
Though Rdio has never released user statistics, it is thought to lag far behind industry leader Spotify’s 15 million paying subscribers and the 45 million users of its free, ad-supported version. Pandora says it has more than 79 million monthly active users.
“While Rdio remains a relatively small online music player versus Spotify and Pandora, it continues to invest and expand its product offerings chipping away at listening hours among its competition,” said BTIG analyst Rich Greenfield in a blog post.
Spotify’s popular free version has become a sticking point for record labels and some prominent artists, including Taylor Swift. Unlike Rdio’s ad-supported tier, it gives Web users unlimited on-demand access to its catalog (mobile users get limited access).
Critics including Bay say that version of the “freemium” model gives too much away and doesn’t give people enough reason to pay up. “All free isn’t created equal,” Bay said. “The premise that if you give something away for free, you’ll get people to pay is silly. We think those forms of free are too good and they hurt the business.”
Bay hopes his $4 version will be low enough to get people in the habit of paying for music so that they might eventually upgrade to the all-you-can-listen model.
Rdio is trying to take a piece of the streaming subscription music business, which jumped 39% to $1.6 billion in global revenue last year, according to the International Federation of the Phonographic Industry. The number of people who pay for subscription services hit 41 million.
The new version of Rdio comes as tech behemoth Apple is preparing to launch its own streaming service after its $3-billion acquisition of Beats. Bay said the timing of his new offering was merely a coincidence.
“Timing your life around guessing what Apple’s going to do is not a good business plan,” he said. “We’ve been working on this for a long time.”