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Pandora Raises Price of Ad-Free Streaming on Royalty Cost

Pandora Media Inc., the biggest online radio service, raised the price of its advertising-free Pandora One option for some users, citing rising royalty costs.

Listeners who now pay $36 a year for the service will be asked to pay $3.99 a month, Pandora said yesterday on its blog. For new subscribers, the price will be $4.99 a month, starting in May. Existing users of a $3.99-a-month plan will see no change.

Pandora is seeking to defray royalty rates that have risen 53 percent in the past five years and are set to increase again next year, according to its blog. In an interview last month, Chief Executive Officer Brian McAndrews said improvements in advertising sales have made the company’s free offering more valuable, in some cases, than its subscription service.

“We feel good about monetization of both platforms,” McAndrews said. “It almost depends now what market and what time.”

Shares of Pandora, based in Oakland, California, rose 1.1 percent to $35.36 in extended trading yesterday. The stock fell 0.4 percent to $34.98 at the close in New York and has gained 32 percent this year.

Pandora One has 3.3 million subscribers, according to the blog. Active listeners in February totaled 75.3 million, the company said on March 6.

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