Now that Pandora has put most of the pieces in place for an on-demand music service, the streaming radio provider has to address perhaps its biggest hurdle: Going global.
On Tuesday, Pandora announced licensing deals with Sony Music Group and Universal Music Group, leaving Warner Music Group as the last holdout among the major labels. The company also agreed to a deal with music rights agency Merlin Network as well as more than 30 independent labels and distributors.
The licensing agreements pave the way for Pandora to take on Spotify and Apple in the on-demand subscription market, moving the company beyond advertising-supported online radio.
But the deals only cover the U.S., underscoring Pandora's principal challenge in expanding its business. While Internet leaders like Alphabet, Facebook and Amazon.com now count on international markets for a substantial percentage of revenue, Pandora has been restricted almost entirely to the U.S. over the past decade.
To date, Pandora has paid royalties under the Digital Millennium Copyright Act (DMCA), which exclusively covers the U.S. The only other countries where the company has forged agreements for paying rights holders are Australia and New Zealand.
Now that Pandora is negotiating directly with the labels, the company expects that consumers in other countries will eventually get to sign up.