According to Bloomberg, Spotify will be launching a U.S. Internet radio service that would be a direct competitor of Pandora Media. The new format would be similar to Pandora, which works just like a radio and is cheaper to operate since royalty rates are lower and is set by U.S. Congress. The new service would be monetized by advertising. Content partners have been notified about the new service already.
An online radio would help Spotify attract new users by offering free and ad supported services with the goal of converting them into paying subscribers. About one-third of people that use Spotify have paid plans that have access to unlimited and commercial free music on their computers and mobile devices.
Spotify has about 10 million registered users and 3 million are paying. Pandora has 150 million registered users and 49 million of them have logged in within the last 30 days. Pandora users cannot choose specific songs, but they have access to any artist who music has been published. Royalties paid by Pandora and other online radio services are set by the Copyright Royalty Board, which is a division of Congress.