Wednesday, March 19, 2014

Pandora Following Amazon Price Increase

With so little backlash to the 25% Amazon Prime price increase, it comes as no surprise that other digital streamers would also follow along.  While I speculated that Netflix could easily do the same thing, word comes that Pandora is next to increase its digital subscription.  Pandora, currently the largest online music streamer thinks it can increase its rate even more than Amazon's 25%. 

"Listeners who now pay $36 a year for the service will be asked to pay $3.99 a month, Pandora said today on its blog. For new subscribers, the price will be $4.99 a month, starting in May."  So existing subscribers see a 33% annual increase while new subscribers will pay even more, a 66% increase from earlier pricing.  Customers already paying $3.99 will not see an increase but don't be surprised that even those $3.99 customers will find themselves by next year also paying a dollar more each month. And given how well the Amazon increase was delivered, this news will blow over just as quickly. 

What does it all mean?  As consumers get more and more value and enjoyment from their digital services, the companies can start increasing rates figuring that the value received will leave many to pay the higher amounts.  With revenue coming from either subscription or advertising, both must rise for them to continue to succeed.  And once consumers are loyal to the value of these services, we pay more in order to stay connected in order to continue to enjoy the content they deliver.  As a percentage, the increase seems high, but when seen as about a buck more a month, we are willing to accept it. 

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