Pandora Raises Subscription Fees, Does Away With Annual Plan

Pandora Media will increase fees for its ad-free music-streaming service by $1 a month to almost $5 a month in May, in a move to cover the rising cost of licensing tunes.

The company, which streams music from virtual radio stations to mobile devices such as Apple's iPhone or Google Android smartphones, said in a Tuesday blog post that royalties paid to artists had risen 53 percent over the past five years and will rise another 9 percent in 2015.

Image: A banner for Pandora
A banner for Pandora Media Inc., the online radio company, hangs in front of the New York Stock Exchange walk on its first day of trading as a public company on June 15, 2011, in New York City. Spencer Platt / Getty Images file

The increase of $1 to $4.99 a month takes effect for new subscribers in May. Existing monthly subscribers will not be forced to accept the higher charges for now, the company said without elaborating.

Annual subscriptions will be discontinued, however. Yearly subscribers currently paying $36 a year will move to a monthly, "loyalty" $3.99 plan once their memberships expire.

Pandora said the fee hikes should affect an estimated 3.3 million listeners, out of 250 million registered users, the bulk of whom tune in to the free, ad-supported service.

"The costs of delivering this service have grown considerably," Pandora said. "We hope that you understand why we have taken these steps. Our goal is to continue to be your go-to internet radio destination."

Pandora is one of the world's most popular streaming music services though it has plenty of competitors, including Spotify and Apple Inc's iTunesRadio.

The announcement comes after a federal judge on Friday refused to lower the rate Pandora must pay to songwriters to license their music.

U.S. District Judge Denise Cote ruled that Pandora should pay the American Society of Composers, Authors and Publishers the same 1.85 percent rate through 2015 that it has for years. Pandora had sought a rate of as low as 1.7 percent.

— Reuters and NBC News staff