Pandora Media to cap free mobile listening as costs surge

Tim Westergren (top center-left), founder and Chief Strategy Officer, and Joe Kennedy (top center-right), president and CEO of Pandora internet radio, watch as their company begins trading on the floor of the New York Stock Exchange June 15, 2011.

(Reuters) - U.S. online streaming music company Pandora Media Inc said it would cap free mobile listening at 40 hours per month as it tries to overcome rising royalty costs.

Pandora, which relies mainly on advertising for revenue, is struggling to grow amid fierce competition from the likes of Sirius XM Radio Inc.

Pandora's per-track royalty rates have increased more than 25 percent over the last 3 years, including 9 percent in 2013 alone and are set to increase an additional 16 percent over the next two years, co-founder Tim Westergren wrote in a blog posted on the company's website.

"After a close look at our overall listening, a 40-hour-per-month mobile listening limit allows us to manage these escalating costs with minimal listener disruption," he said.

Pandora is currently lobbying lawmakers in U.S. Congress to pass the Internet Radio Fairness Act, which would change regulations on how royalties are paid to artists.

Online streaming music companies like Pandora pay a different rate to license music than traditional radio companies.

Westergren said the move would affect less than 4 percent of its total monthly active listeners as an average listener uses only about 20 hours listening to Pandora.

Listeners who reach the 40-hour limit can pay 99 cents for unlimited listening for the remainder of the month, or subscribe to Pandora One for unlimited listening and no advertising, he wrote.

For the statement: link.reuters.com/dyt36t

(Reporting by Bijoy Koyitty in Bangalore; Editing by Edwina Gibbs)