Music streaming service Pandora Media Inc. (P, Financial) recently introduced a new way for users to access on-demand music without having to pay for a Premium subscription. Radio listeners and Pandora Plus subscribers now have the option of watching a video ad to unlock an on-demand streaming session.
News of the feature sent the company's stock up 0.42% in after-hours trading on Dec. 14.
Pandora explains in the announcement that users are given the option to watch an ad when searching for a specific song, playlist or album. The option may also pop up when Pandora recommends a song or when coming to the app from a third-party link.
Video advertisements play for 15 seconds, and allow users to start a Pandora Premium listening session. During the session, users enjoy uninterrupted music.
"Pandora's new on-demand feature is a great opportunity for artists to get more exposure," says Tony Fountain, founder of NOW Entertainment. "Artists can now give fans a direct link to play their music."
It also gives Plus subscribers and free account holders a little more control over their listening experience.
Earlier in the year, Pandora launched its Premium service as an answer to Apple Music and Spotify. Users pay $9.99 per month for on-demand music listening and the ability to create their own playlists.
Pandora's Premium service helped it grow its in-app subscription revenues, booting Netflix (NFLX, Financial) from the top spot on the app store in the third quarter. The company also saw an increase in paid subscribers in the third quarter, increasing to 5.19 million from 4.01 million in the same period the previous year.
Pandora's ad business still provides the majority of its revenue. Of the $378.6 million in revenue in the third quarter, $275.7 million was ad-related. The majority of the service's users are ad-supported.
The music streaming service had 73.7 million active listeners in the third quarter, down from 77.9 million users in the same period last year. The total number of subscribers grew to 5.19 million.
Pandora's latest move allows the company to capitalize on its strong point (advertising) while giving users a feature they have long requested: on-demand listening.
"Our ad-supported listeners’ top request has consistently been the ability to directly play the specific songs, albums, or playlists they want," President and CEO Roger Lynch said. "These new features address that need by marrying rewards-based advertising with the best-in-class on-demand experience we’ve created with Pandora Premium. This unrivaled experience will drive listeners to Pandora and drive awareness for Premium, while also creating new opportunities for artists, labels, publishers and advertisers."
Pandora says users between 20 and 49 are more likely to respond to this type of advertising. The company notes that 67% of users in this age range are "more likely to prefer mobile reward video ads than other types of ads, such as unskippable pre-roll."
Gen Z users (between 16 and 19 years old) are three times more likely to prefer mobile rewarded ads, says Pandora.
Streaming sessions include background listening support and the ability to create playlists that can be returned to the next time they listen. Once the session ends, users can choose to watch another video and continue with their on-demand listening.
Disclosure: The author does not have any stake in the listed equities.
