Pandora is also ditching the option to subscribe to its service annually, a $36 option that saved users about $11 a year compared to the monthly subscription. Those who currently have an annual subscription -- and use it -- will be migrated to a $3.99 monthly rate when they're due to renew.
The company said that the change, spurred by increased costs including in the royalty rates it pays to the digital performance rights organization SoundExchange, affects 3.3 million of its 250 million registered users. The move comes as the firm struggles to stay profitable. Last quarter Pandora posted a $9 million profit, its biggest since going public in 2011, but forecast a loss for the upcoming quarter as operation costs rise.
Pandora is still the leader in the online streaming music space, according to a study this month from Edison Research that shows nearly one-third of people surveyed in a national telephone poll listened to Pandora in the past month -- 31 percent, s compared to the 9 percent who listened to its next-closest competitor, iHeart Radio.
Apple's iTunes Radio, which debuted in September and was feared to be a Pandora-killer, pulled in 8 percent -- ahead of other services that have been on the market for longer, such as Spotify, Google Play All Access, Rhapsody, Slacker and TuneIn Radio.
The space is getting more and more crowded by the day. Beats Music launched in January, promising a better DJ-like level of curation for its users. But, so far, Edison Research says that the growth in the market hasn't become a zero-sum game -- every new entry seems to be helping grow the audience overall.
The competition for streaming music will get more heated, however, as more companies jump into the space specifically for the purpose of getting music streamed to your car. In-dash systems, such as the CarPlay program that Apple added into its mobile operating system earlier this month, are gaining a steady foothold in the market.
According to the Edison Research study, having a smart, in-dash system also becoming an increasingly important part of new car buyers' decision. Over one-fifth of those surveyed who plan to get a new car in the next 18 months said that it's "very important" for them to have that kind of system, while 18 percent said it was "somewhat important."