Pandora Radio’s Hands are Tied, But Still Punching Spotify

Pandora Radio's not going down without a fight.
With the now prevalent use of smartphones, more people hunger for the convenience of Internet radio – Arbitron and Edison’s 2012 Infinite Dial Report found that 29% of consumers 12 years or older listen to Internet radio on a weekly basis; 10 hours a day on average.

Though there are many online radio options out there, Pandora Radio and Swedish upstart Spotify have floated to the top, but are fighting with each other to stay there, and Pandora’s still hanging on, despite Spotify’s elbow in its neck.

A great Reuters article featured on Doddle compares the two services (though it was Pandora-heavy) and gave a nice heads-up about Spotify’s growth.

I’m exposing the fine points and flaws of both for you here. 

The Pros

Pandora Radio

1. Its biggest plus is summed up in three words: home court advantage. Since it’s been in the U.S. for longer (2005), its customer base is much larger and has had time to grow, boasting 150 million listeners as of May 8, 2012, and accounting for “more than 69% of all Internet radio listening in the U.S.,” according to its website.

2. Thanks to its domestic ubiquity, Pandora raked in a cool $274 million in revenue last year, mostly from the 10- to 30-second ads it peppers in between songs for us listeners who are too cheap to pay for the subscription, according to Reuters.

3. Its Music Genome Project has made it an indie music darling, leading listeners to discover music they would otherwise never hear, which leads to album sales for indie and international artists (perfect for music festivals).   

4. Pandora enables social sharing so listeners can let their networks know what they’re listening to, which potentially furthers indie artist exposure.


1. Since it began in Europe before launching in the U.S. in July 2011, its partnership with Merlin, an overseas non-profit network of indie record labels, fattened its library (18 million songs) and dwarfed Pandora’s, which sits at approximately one million songs.

2. Songs can be played on demand in addition to a stream of recommendations, and from what I’ve learned from other users, with unlimited skipping ability (Pandora limits you to less than a handful of skips per hour).

3. Spotify smartly integrated Facebook sign-in with its site, making listeners’ lives easier with one less username and password to remember, and shares songs with Facebook friends as well (though this doubles as a con).

4. While there’s bitter contention about the miniscule royalty rate that Spotify pays indie artists (averaging between 0.3 and 0.5 cents, depending on the success of the artist’s songs each month), it still beats Pandora’s, which is currently between 0.1 and 0.2 cents, according to Reuters.

5. It’s Last.Fm-integrated, which allows you to see which songs you listen to most frequently, and you can then send that data back over to Spotify to play those favorite songs on demand more often.

The Cons

Pandora Radio

1. Despite its ubiquity and sweet ad revenue, it’s still bleeding a bit, reporting a $16 million loss at the end of its last fiscal year (January 31, 2012). Here’s some insult to injury: initial shares in 2006 sold at $16, but only sell at $8.75 as of May 4, 2012.

“Ouch” doesn’t begin to express that.

2. Because of its limited licensing arrangement with the record labels, Pandora Radio is only available in the U.S., whereas Spotify is available in 13 countries in addition to the U.S.


1. The Facebook partnership puts your business in the streets. Not all users care to let their networks know what they’re listening to all the time, and from personal experience, I can tell you it’s a little annoying to see Spotify shares all over my news feed.

Besides, not everyone that uses online radio has or wants a Facebook account, which Spotify requires to use its service.

2. Because it’s still relatively young (2008), it only has 13 million users so far (10 million free, 3 million paid subscribers).

3. It now has a 6-month free unlimited trial period, after which is a limited 10 hours of listening per month, whereas Pandora’s free account allows you 36 hours. 

Pandora – Saved by the Bell

You have to honestly applaud Pandora for hanging on. It has fewer pros than Spotify, but also has fewer cons, which is why it’s lasting despite Spotify’s buzz.

However, if it has any intention of maintaining its dominance, Pandora will need to expand its licensing to include overseas labels – not only to fatten its library, but also to make its service available to more listeners and broaden indie artist’s reach.

Its premise of helping people discover new music is honorable, but it’ll accidentally punch itself in the face if it doesn’t make that offer available to more people who are hungry for quality music. It’s a win-win situation Pandora should optimize as soon as humanly possible.

So which one do you use: Pandora or Spotify? And why do you feel your choice is better than the other? Give me your opinion in a comment below.

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Flickr photo by Connor Tarter.


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