Pandora, the most popular radio service on the Internet, will let users listen to music on mobile devices as long as they please starting September 1, following a 40-hour cap set six months ago.
But that's because the company believes it has figured out how to keep people from wanting to listen much longer.
Plagued by rising royalty licensing costs, Pandora in February said listeners who don't pay to subscribe to the service would be limited to 40 hours of free music each month, after which time they would have the option to pay a one-time fee of 99 cents for the remainder of the month or subscribe to the premium service, which features unlimited music that isn't interrupted by advertisements.
Pandora eliminated a similar listening limit for desktop users in September 2011.
Nonetheless, Michael S. Herring, the company's financial chief, said Thursday that Pandora doesn't expect a big spike in hours when the limit is removed. He said tools like skip limits and other measures will manage Pandora listening patterns much more closely than the "blunt tool" of a cap did.
He estimated hours listened decreased 10 percent after the limit was imposed. "We don't expect that to step back up again," he said. He also said Pandora has figured out how to make more money on those additional hours greater than 40.However, because there won't be as compelling a motivation to sign up for a premium subscription after the cap is removed, Pandora expects its growth in subscribers won't match the rate in the last six months.
Herring made the comments during a conference call to discuss the company's fiscal second-quarter results. Pandora notched big sales gains in its top line as mobile revenue continued to grow rapidly, but investors were dismayed by a weak profit outlook restrained by plans to invest more in development.
The company also more keenly managed its licensing costs in the latest period, with the percent of content-acquisition costs to revenue falling.
The company reigns on top of the Internet radio market, but it faces an uncertain future, with its leadership unclear just as behemoth Apple prepares to roll out its own Web radio product, iTunes Radio, this fall.