Another week, another shake-up in the digital music world. Pandora, the company that pioneered personalized Internet radio, is eyeing a leap into the on-demand music space dominated by Spotify, Apple Music and, until today, Rdio.
Today, Pandora announced that it’s acquiring “key assets” from Rdio, a company that preceded Spotify in the U.S. market, but has struggled to keep up with the fast-proliferating competition in the music subscription space. The $75 million deal will give Pandora Rdio’s technology, intellectual property, and some of its talent, but crucially, not Rdio’s operating business itself, which is seeking bankruptcy protection.
It’s a pretty significant moment in streaming music. For Rdio users, this means their favorite on-demand subscription service will soon be no more: Pandora says its plans to launch a new listening experience sometime next year. For Pandora, it pits the company more directly against Spotify, Apple Music, Deezer, and Tidal.
For years, Pandora and Spotify have both been synonymous with what we call “streaming music,” but the products are actually quite different. Pandora has long specialized in personalized, artist- and song-based radio stations. Spotify, on the other hand, is an on-demand music subscription service: Users can stream any album or track they want, so long as its available in Spotify’s massive catalog (or otherwise imported via Spotify’s somewhat clunky process for merging one’s own tracks with the company’s library).
Until on-demand services began proliferating like crazy over the last few years (Apple Music, Google Play Music, YouTube Red, and Tidal have all joined the party in the last two years), Rdio was arguably Spotify’s chief competition in the U.S. With Pandora’s acquisition of Rdio assets, Pandora will likely feel a lot more like Spotify and Apple Music by next year.
That’s good for Pandora, because in the 10 years that have passed since it started building its famous Music Genome Project–the human- and algorithm-powered machine behind Pandora’s pioneering discovery and curation features–every other major player in this space has ripped off the concept. Apple launched iTunes Radio (followed by Beats One earlier this year). Spotify launched its own Pandora-inspired Internet radio features using music intelligence data from The Echo Nest, a company that Spotify then acquired in March 2014.
The exploding competition hasn’t come close to killing off Pandora, but that–combined with the trouble it’s had getting its sky-high music royalty costs under control–have made its business more challenging than ever. With today’s announcement, Pandora is lobbing a grenade at all the big players that have mimicked its core functionality and saying, essentially, that two can play at that game.
But it’s not like Pandora can just plug Rdio’s huge streaming library in and call it a day. The “intellectual property” part of this deal does not include the music licensing deals that Rdio has amassed to make its on-demand library possible. So Pandora still has some work to do in terms of negotiating streaming deals, but it now has the technology, talent, and infrastructure it needs to go on-demand once all those i’s are dotted.
The move also helps bolster Pandora’s business model. Because even though the company’s name remains synonymous with Internet radio, it’s getting easier to build and scale machine intelligence and hire expert human curators. What Pandora started building in 2005 felt revolutionary at the time, but now there are several large, well-resourced technology companies throwing time, money, and talent at the same problem.
Of course, becoming another Spotify clone isn’t going to single-handedly save Pandora. That’s why it has been diversifying its business in other ways too. Earlier this year, the company acquired music analytics powerhouse Next Big Sound and concert ticketing platform Ticketfly. The Music Genome algorithm may still be flowing strong through the pipes beneath Pandora’s business, but if the last few months are any indication, the outer facade is going to start looking pretty different soon.