Pandora Acquires On-Demand Streaming Service Rdio
Rdio—the Oakland, California-based, on-demand streaming service providing access to more than 30 million songs, which Cumulus has a 15 percent stake of—will be acquired by Pandora in a $75 million cash deal.
Key assets involved in the deal, announced yesterday (Nov. 16), include technology, intellectual property, and talent (with the exclusion of Rdio CEO Anthony Bay). If approved, the remainder of Rdio is expected to file for bankruptcy and shutter its existing service, which currently operates in over 100 countries.
The acquisition will allow Pandora to begin to more directly competing with on-demand streaming services like Spotify, YouTube Music, Deezer, Google Play, Rhapsody, or Apple Music. Additionally Pandora may increase international availability, as the service is only available in the U.S., Australia and New Zealand.
“Whether streaming through radio, on-demand or in-person at live events, Pandora is building the definitive source for fans to discover and celebrate music,” said Brian McAndrews, chief executive officer at Pandora. “Wherever and however fans want to hear music, we intend to be their go-to destination…We seek to be the definitive source for music discovery and enjoyment globally,” he continued in describing a full on-demand paid subscription model, intended “to substantially broaden our subscription business.”
Pandora has been subject to lower rates and a more simplified licensing structure because of its limited, non-interactive streaming model (amount of skips per hour, not offering full-album streaming). Earlier this month, Pandora stated its deal with Sony/ATV music publishing will allow “new flexibility to the company’s product offering over time.” According to Variety, “music licenses typically don’t transfer to a new owner with an acquisition, so Pandora would still have to strike direct deals with the labels to keep Rdio up and running.” The current announcement will help Pandora, however, realize plans to “expanded [its] listening experience by late 2016, pending its ability to obtain proper licenses.”
Although the streaming giant currently offers an ad-free version—Pandora One—charging $4.99 a month, Pandora has seen advertising revenue grow only 31 percent year-over-year while its content acquisition costs soared 90 percent, and it failed to turn a profit after deducting operating expenses, according to Ad Age.
Rdio was founded in 2010 by Skype’s co-founders Niklas Zennstroem and Janus Friis, who remained heavily involved in the company and is thought to have invested more than $200 million in Rdio, according to Variety, where Janko Roettgers continues:
In 2013, Rdio struck a deal with U.S. radio giant Cumulus, trading 15 percent of its equity for $75 million in radio advertising, that valued the company at $500 million.
In early November, Cumulus revealed to investors that it had taken a $19.4 million writedown on its equity in Rdio this year.
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