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Everything You Need to Know About Pandora Plus

By Steve Symington – Updated Jun 1, 2018 at 10:51AM

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Whether you're an investor or music lover, here's the lowdown on Pandora's new subscription service.

Pandora Media (P) on Thursday unveiled a new subscription service dubbed Pandora Plus, heralding it as a "one-of-a-kind, ad-free radio experience with dramatically increased functionality." So why, then, have shares of Pandora hardly budged today?

What Pandora Plus isn't

First, Pandora Plus is not the music-streaming leader's widely anticipated on-demand music solution. But Pandora founder and CEO Tim Westergren didn't leave us completely in the dark on that front, stating (emphasis added):

We're methodically and passionately developing the world's most personal music experience. And that includes flexibility in how you listen and what you pay for it. Whether a listener wants to take advantage of our enhanced ad-supported experience, our groundbreaking subscription radio service, or our fully interactive on-demand option coming later this year, we have a solution tailored for you at a price point you can afford.

That's fair enough. Within that group of listening options, Pandora Plus obviously falls under the "groundbreaking subscription radio service" description. But in the meantime, as we wait for that (more) exciting on-demand option to be released, what is Pandora Plus?

Woman listening to music on tablet via headphones

Image source: Getty Images.

Pandora Plus is the successor of Pandora One

With its identical subscription cost of $4.99 per month, Pandora Plus is meant to be a replacement for the existing Pandora One subscription service. In fact, Pandora One users will seamlessly transition to the new Pandora Plus service as it rolls out to listeners in the coming months on iOS and Android.

Among its enhancements, and without offering specifics just yet -- as management will host a conference call with a product demonstration on September 20, 2016 -- Pandora Plus users will enjoy more skips and and replays relative to Pandora's free ad-supported platform, as well as a new predictive offline mode that automatically detects when a signal is lost, then keeps playing without missing a beat by switching to one of your (presumably cached) other top stations until the signal returns.

What's more, Pandora is making the most of this new engineering to simultaneously enhance its ad-supported version, giving listeners the option to skip more songs and replay songs by opting into a video ad. This move also affords Pandora the happy consequence of providing advertisers with more engaged audiences.

Pandora Plus required new "landmark" direct-licensing agreements

It's no coincidence that earlier this week, Pandora also announced it had struck "landmark" direct-licensing agreements with more than 30 independent labels and music distributors, including Merlin Network, Sony Music, and Universal Music Group. Pandora described the new agreements as a "win-win partnership" between it and the labels. It further stated they will open "new revenue streams for artists and labels, while paving the way for Pandora to bring new products to market that enable enhanced subscription services, fuel new advertising opportunities, and deliver unprecedented flexibility and ease of use to listeners."

Of course, Pandora obviously didn't disclose the exact terms of the licensing agreements. But given the description of their purpose above, it seems fair to say they were a prerequisite for Pandora to be able to introduce both Pandora Plus, and later on, its interactive on-demand option.

Pandora Plus is only a small piece of the long-term puzzle

Finally, speaking to Westergren's mention of Pandora "methodically [...] developing the world's most personal music experience" with multiple listening options, recall that, earlier this year, Pandora initiated plans to make massive investments totaling $345 million in 2016 aimed at scaling infrastructure and building new lines of business. At the time, Pandora told investors it believes it can build a $1.3 billion subscription business as new product tiers are launched and adopted over the next five years -- a goal conservatively based on converting around 10% of its current U.S. listener base to these subscription products.

Considering Pandora Plus seems to represent, more than anything, an incremental upgrade and rebranded version of Pandora One, it's no surprise to see such a muted reaction from the market today. But I think investors should also be encouraged as long as Pandora continues to implement its long-term vision as it strives to become a one-stop shop for all music listeners' needs.

Steve Symington has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Pandora Media. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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