Pandora’s Box is Short on Mobile Ad Revenue

Music streaming service Pandora is capping how much music you can stream each month if you’re a non-paying customer.

On the heels of confirming disappointing mobile ad revenue, Pandora is placing a 40-hour-per-month limit on mobile listening for those using the service for free.

According to a report from AdAge, Pandora founder Tim Westergren suggested Wednesday that the time had come for Pandora’s biggest mobile users to become paying customers.

Mr. Westergren said the move is antithetical to the company’s goal of trying to provide the music service to as wide an audience as possible, but necessary given ad revenue isn’t sufficient to pay music royalty rates.

Fortunately, the cap is expected to impact less than 4% of the company’s non-paying users today.

“Limiting listening is a very unusual thing to do, and very contrary to our mission so we wanted to share a quick explanation,” Westergren says. “Pandora’s per-track royalty rates have increased more than 25% over the last 3 years, including 9% in 2013 alone and are scheduled to increase an additional 16% over the next two years.”

If you’re among the 4% of subscribers who listen to more than 40 hours of music per month without paying for the service, continuing your voracious appetite for streaming music will now cost you $3.99 per month or $36 per year (for unlimited streaming and no ads).

Are you surprised by or disappointed with Pandora’s decision? Or is this, quite frankly, a necessary business decision? Please weigh in with your assessment in a comment below.