Online Radio

Before switching to a freemium model in 2005, Pandora offered online radio by artist and song for a premium price. This was used by some early adopters, but the service did not see a surge in membership until they offered a free version of the service. Music consumers had grown accustomed to free downloads; to compete against free, Pandora had to offer free services. Additionally, Pandora once offered its services at a premium for $9.99 and more per month. Presumably, amid strong competition from other services such as Spotify and iTunes Radio, Pandora has lowered it's paid tier to $4.99 per month.

Another pricing strategy employed by Pandora is odd-numbered pricing. Odd numbered pricing is the theory that customers believe they are receiving a better value when prices end in 9, 95, 97 and 99 as opposed to even-number pricing. With strong competition from services that offer more in terms of the services listeners come to expect and integration with other applications, coupled with price-sensitive users, Pandora is under pressure to provide value and odd-number pricing is a simple way to project it. I agree with both pricing strategies. The switch to the freemium model Pandora made early on allowed it to gain customers that expected music to be free. The lowered and odd-number pricing was also sensible in that it fits the offerings Pandora provides in comparison with the enhanced services its competitors provides.

Two of Pandora's competitors are iTunes Radio and Amazon Music. iTunes Radio, a direct competitor of Pandora, offers it's users similar services as Pandora. There is the ability to create stations by artist and song, and the ability to like or dislike a song to help the service determine which songs fit a user's individual tastes. Unlike Pandora, however, iTunes Radio is completely free for iTunes and Apple device users, provides stations by genre, and offers First Plays (the ability to listen to full albums before they are released). ("iTunes Radio," 1). iTunes Radio now has 20 million users since it's launch, in comparison to Pandora's 200 million