Pandora's cap on mobile use pays off by cutting costs

Los Angeles - Pandora Media, the biggest online radio service, said a 40-hour monthly limit on mobile users imposed earlier this year has cut music streaming and content costs as intended, while the audience continued to grow.

Pandora streamed 1.31 billion hours of songs in April, the first full month with the cap in place, a 5.1 percent drop from February's 1.38 billion, the Oakland-based company said Monday in an emailed statement. Adjusting for February's fewer days, listeners streamed 10 percent less, Chief Executive Officer Joe Kennedy said in an interview.

"The decline in hours will be very closely mirrored in content acquisition costs," Kennedy said, declining to provide specifics. The company reports first-quarter results on May 23.

Pandora's results since implementing the cap suggest the company is starting to contain content costs, its biggest expense, without alienating listeners. The company in March began targeting the 4 percent of mobile users who were streaming more than 40 hours monthly, to stanch royalty payments that had ballooned as the service gained popularity.

Those who reach the cap can pay 99 cents to continue using the Pandora, switch to a desktop computer or enroll in Pandora One, a $36-a-year commercial-free option that gives more control over song selection.

Of the users who hit the limit in March, 86 percent returned in April, Kennedy said. Some coped by switching to Pandora's unlimited desktop version, while others chose to pay, Kennedy said.

"People found a way to make it work for them," said Kennedy, who resigned as chairman and CEO in March, pending the selection of a successor.

Active users in April climbed to 70.1 million, Pandora said. That represents about a 3.5 percent increase from February's 67.7 million and a gain of 0.9 percent from March.

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