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Spotify Said Developing Pandora-Like Online Radio Service

Spotify Ltd., the London-based online music provider, is developing a U.S. Internet radio service that would directly challenge Pandora Media Inc., said two people with knowledge of the situation.

Spotify’s current service functions like a music collection, allowing users to create playlists from specific albums and tracks. The new format would be similar to Pandora’s, which operates like radio and is cheaper to operate because royalty rates are lower and set by Congress.