Both Amazon and Pandora are months into their negotiations with publishers and record labels for new licensing terms.
As well as their $5 service, the company also plans on offering a more conventional $10-a-month service that will be similar to mainstream services: a catalog of songs available on-demand with zero restrictions or ads. Pandora has said it plans to begin selling both to users before the end of the year.
One key point: the deals announced today cover the United States only, so Pandora will need expanded global agreements before it can launch its new offerings elsewhere in the world. It now has 78 million users, which I'm sure will all be flooded with ads (unless you have Pandora One) for the new subscription service once it launches.
Pandora calls the agreements "win-win", but a question mark remains over how its royalties will be paid through to labels in future, and what that will mean for artists.
Pandora said in July it had 78.1 million active listeners as of June 30.
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Subscription services which go out of their way to offer low prices often struggle to keep afloat after the first few months. Subscribers will be able to skip more songs and store several hours of playlists in the cloud, The New York Times says it heard from three people claiming to have direct knowledge of what Pandora's planning to do. If they do so, they would put increasing pressure on other music services provided by Apple Inc.
The New York Times quoted one expert suggesting Amazon (NASDAQ: AMZN) and Pandora (NYSE: P) may be lowering prices even though there's limited evidence more customers would pay those lower prices.
In addition to adding more cooks in the kitchen, the new subscription might also cause the music streaming industry to rethink its pricing strategies.
While up until this point, streaming services have largely been priced at approximately $10/month, Amazon and Pandora are teaming up to change that.
Now Pandora has direct deals with its main suppliers. Pandora has said it plans to expand internationally after the establishment of its on-demand service.
