Pandora buying up struggling Rdio, counting on data and users to make idea profitable

Online radio company Pandora Media Inc. announced Monday the acquisition of assets from music-streaming startup Rdio Inc., a company once valued at over $500 million, for $75 million.

The deal is contingent on the U.S. Bankruptcy Court in San Francisco granting bankruptcy protection to Rdio and approving the transaction. Pandora will be getting technology and a “significant number” of employees, but not licensing deals or the brand, executives said.

Pandora described its latest acquisition as another step toward trying to play in other areas of the music industry. The Oakland-based company is by far the largest of its kind. But competition from music streaming startups and looming regulatory decisions that could cause Pandora’s licensing costs to skyrocket have threatened its quest for consistent profits.

So while still holding lots of cash ($364 million in cash and short-term investments), Pandora is buttressing revenue by expanding into ticket sales and new types of listening options beyond computer-curated stations. The moves are directed at getting its 78 million users to spend more time on Pandora.

“We’re aggressively moving full-steam ahead,” Pandora Chief Executive Brian McAndrews said on a conference call with analysts Monday afternoon. “Our core business is massive...it’s an attractive launchpad into adjacencies of the music industry.”

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Rdio is expected to shut down if the deal goes through, while Pandora said the acquisition would fast-track its development of new features, which are expected to launch late next year.

Rdio offers both free, Pandora-like listening with ads and paid subscriptions to get rid of ads and choose which songs play. Rdio raised more than $100 million in funding, with an investment a year ago implying the company was valued at about $500 million.

Pandora executives declined to discuss how many users Rdio has or details about its business. But they said they should be able to make a Rdio-like business profitable by taking advantage of Pandora’s large userbase and the knowledge about their music tastes to decrease marketing costs and increase usage.

“We’re just in a way better position than they ever were,” McAndrews said.

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