P Pandora Media, Inc.

By Hannah Karp 

When Pandora Media Inc. launches its $10-a-month music service next month, it faces steep competition from a host of more established streaming providers.

But the Internet-radio giant has an edge with one relatively untapped fan base that has long been willing to pony up for tunes, albeit often in the form of CDs at Wal-Mart: country music lovers.

With 55 million of its 78 million active monthly listeners having tuned into its "Today's Country" station, Pandora is a trusted brand in the country world, said Cindy Mabe, president of Vivendi SA's Universal Music Group Nashville. The country-music subsidiary says 10 of its artists each have had songs streamed on Pandora more than 1 billion times.

When country fans fall in love with an artist they are "fans for life, and with Pandora it's the same situation," Ms. Mabe said. "It's not something new where you have to explain what a 'Spotify' is."

Paid music consumption rose 4% in the U.S. last year, the second year of solid growth after more than a decade of decline or stagnation, according to BuzzAngle Music. The uptick was due to a 76% increase in on-demand streams on services such as Spotify AB, Apple Inc.'s Apple Music and Jay Z's Tidal, which more than made up for declining album sales.

But with around 100 million paying subscribers among them world-wide, paid streaming services still haven't captured mainstream consumers in the U.S. Record labels are hoping the forthcoming Pandora Premium can help spread the subscription model among a country-music crowd accustomed to streaming songs -- with ads -- for free. Converting these people to paid subscribers is critical at a time when CD and download sales continue to fall.

Pandora's free radio service has generated more than $2 billion for the music industry since it launched in 2000, though that sum pales in comparison to the $5 billion Spotify has paid the industry since it launched in the U.S. in 2011.

Country fans tend to be older than fans of other genres, but they are coveted by the music business for their spending habits and loyalty. Country album sales have been declining more slowly than any other major genre, with country titles accounting for more than 16% of all CD sales in the U.S. last year, up from 14% in 2015, according to research firm BuzzAngle Music.

At the same time, country songs accounted for just about 6% of the total streams on paid streaming services such as Apple Music and Spotify Premium for the past two years, BuzzAngle Music said. Country fans were also slower to switch from CDs to digital downloads when Apple launched its iTunes Store in 2003, and many still prefer the physical goods.

Universal Music's Ms. Mabe said that while country fans have been late adopters, the lag stems in part from the fact that many of the streaming services haven't gone aggressively after the demographic. "We haven't been that bright shiny toy that everyone's been after," she said.

Instead, subscription services have been primarily appealing to younger listeners by promoting hip-hop and pop-leaning playlists to accompany activities like partying and working out.

While Spotify is the world's top subscription streaming business, with more than 40 million paying subscribers, Pandora's toughest competitor for country fans could be Amazon.com Inc. The online retailer launched its own on-demand service called Amazon Music Unlimited in October after it landed the exclusive rights to stream the catalog of country icon Garth Brooks, a longtime digital-music holdout. The share of country-song streams on Amazon is now double the industry average since it began offering the Unlimited service for $4 a month to customers who buy its voice-activated Echo speakers, the company said.

Mr. Brooks said in an email that he favored Amazon because it had "the care and attention of a 'mom and pop' retail stop but with a global scale and a future like no other retailer."

Pandora's chief executive, Tim Westergren, said he was optimistic the 17-year-old company could convert a healthy number of its country listeners into paying subscribers given how engaged both country fans and artists are on the service. Country acts are the most active artists on the platform, using it to reach their fans, route their tours and sell concert tickets.

Tim McGraw and Faith Hill, for instance, gave Pandora users early access in October to tickets for their "Soul2Soul" world tour this year. Mr. Westergren chalked up country's early adoption of the service as a marketing tool to the fact that country musicians tend to tour constantly, rather than once every few years. Though falling album sales have spurred bands of all types to spend more time on the road recently, he said country is generally more rooted in the idea of the "working musician."

"It's a genre of artists that have paid their dues -- there's no overnight success in that business," said Mr. Westergren.

When Pandora sponsored and streamed a performance by Florida Georgia Line in August, the band's manager, Seth England, said he saw a surge in interest in the band on other streaming platforms too, suggesting that a good number of Pandora's country listeners may already be subscribing to other services. But he also said he knows plenty of faithful Pandora listeners in rural America -- including some of his relatives -- for whom brands like Spotify still don't ring a bell.

"Our kingdom come -- that day of arrival on streaming -- is going to be a few years behind pop," he said.

Write to Hannah Karp at hannah.karp@wsj.com

(END) Dow Jones Newswires

February 18, 2017 08:14 ET (13:14 GMT)

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