Pandora to Use Audio Advertisements

In an effort to stay afloat, the Internet radio station Pandora will begin including commercials as part of their present free service offerings.

In an effort to stay afloat, the Internet radio station Pandora will begin including commercials as part of their present free service offerings. In 2007, the U.S. Copyright Royalty Board doubled the performance royalty rate per-song played on Internet radio stations such as Pandora, cutting Pandora’s $25 million revenue in royalty fees by 70 percent since these new royalty rates took effect in August 2008. At the time of the rate increase, Pandora founder Tim Westergren questioned the future of his enterprise saying, “We’re approaching a pull-the-plug kind of decision.”

In the past, Pandora has experimented with other forms of advertisement in an effort to stay solvent, including graphic ads on the company’s iPhone service. Best Buy, Beck’s, and Kraft have previously purchased graphic ads on this service. These ads appeared at the bottom of the screen and directed users to a landing site, without musical interruption. With this most recent announcement on the company’s Twitter however, it appears that audio advertisements will become a regular occurrence on Pandora. The announcement notes, “We did not take on audio ads lightly. We try to be extremely respectful of your listening experience, & promise to be prudent.” In keeping with this message, one 15-second audio ad will play for every few hours of listening. So far, Fox’s American Idol, Bose speakers, and McDonald’s have bought ad time. Users who prefer an ad-free listening experience may opt to purchase a premium membership to Pandora at the cost of $36 per year.