Spotify is Better Than Pandora…But Spotify Radio is Terrible

Music is by far the type of content I consume most frequently. Without it, I think a lot of my life would be much more difficult — commutes would be less exciting, and exercising would be even more miserable. As a result, Spotify is far and away my most treasured app, and I am happy to pay $9.99/month for the service.

I was thinking about Spotify today primarily because of its confidential filing to go public, which multiple media outlets announced yesterday. This move has been rumored for a while and comes as absolutely no surprise, and I am looking forward to getting a glimpse of the company’s financials.

However, there is a second reason I thought about Spotify today. We have a SONOS in our office. Typically, a co-worker of mine controls the SONOS and serves as DJ, but he was out sick today, and I took over. He uses Pandora radio instead of Spotify radio because he says it’s just plain better.

I have never really noticed the discrepancy, since I’m usually listening to my own music during the day anyway, but I have been frustrated in the past with Spotify radio. The same songs seem to repeat over and over again on certain stations, and users are seemingly penalized for skipping songs. I have found that the longer you go without skipping songs on Spotify radio, the more interesting and less repetitive the songs get. I’m not alone in holding this sentiment. Here is one complaint on Spotify’s website from July 2017:

I miss Pandora so much when using Radio feature in Spotify. With a huge database and the radio option keeps playing the same artists (I’d say 5 no more than 7 different artists) over and over again. And when you skip a song from an artist that played like 3 songs before it goes to another artist played 5 songs before. This is extremely anoying. When I choose to play a radio from a song or an artist it doesn’t mean I want to listening to that artist all the time (if this was the case I would just shuffle play that artist instead).

The above review is not an outlier — do some Google searches. The Spotify website is littered with specific complaints about the radio feature. In fact, when I type “why is Spotify radio” into Google, the first suggestion that pops up is, “why is Spotify radio so bad.”

Today, because I was manning the SONOS and I know my co-worker uses Pandora radio, I tried out the service instead of Spotify. I noticed the difference immediately. Pandora radio is, well, just way better than Spotify. The radio stations are more interesting, dynamic, varied, and serve as a better discovery feature for new songs.

So…why is Spotify radio so bad? You would think that making an interesting, dynamic playlist from one artist or album focal point would be Spotify’s bread and butter based on all of the data the company collects from listeners. And why is Pandora so much better? I think the explanation lies in one central difference between the two companies:

• Spotify is a streaming service that offers radio
• Pandora is a radio service that offers streaming (and only very recently)

Although this may seem like an obvious, and even unimportant distinction, I think it has two very relevant consequences that explain why Spotify radio is so much worse than Pandora. First (and most obviously), Spotify’s product is just not as dependent on the radio feature as Pandora’s has historically been. Spotify has been able to survive without pushing its radio feature because of everything else the platform offers: discover playlists, ad-free streaming, and insight into what your friends are listening to. Pandora, on the other hand, started out as, and still primarily is, a radio service. Radio is its product, so it is just way more developed than Spotify’s.

Second, the companies have vastly different business models. While Spotify offers a monthly subscription fee for its premium service, 80% of Pandora’s revenue comes from ads as of early 2017 (this may begin to change as Pandora’s streaming service grows). Ultimately, Pandora needs users to continue to listen to its radio stations because of its reliance on ads. Pandora benefits from keeping customers engaged because it means the company can sell more ad space at higher prices. Spotify, on the other hand, just needs customers to enjoy the service enough to pay another $9.99 in one month. Spotify does not rely on continuous listening to generate revenue in the same way Pandora does. So, automatically creating radio stations that employees can passively listen to and enjoy for hours (for example) is just not super important for Spotify.

Perhaps the two companies are on a path to look more similar in the future. Pandora has increasingly begun to look like Spotify, and maybe the increased competition forces Spotify to improve its radio feature. Or, maybe Spotify just doesn’t care about radio because (a) it’s not a radio company and (b) it’s not as reliant on ads as Pandora is.

Either way, it is important to note that at a high level, company deficiencies are not random. They come from longstanding strategies, missions, and company identities. Moreover, company deficiencies are not necessarily bad. They just mean that companies focused on other parts of their business at various points in their development. In this case, Spotify sacrificing radio for other services has undoubtedly been the right move. When Spotify formally IPOs, it will do so at a much higher valuation than Pandora, despite Pandora’s better radio offering. Pandora’s market cap is ~$1.2b (I was to lazy to calculate enterprise value), while Spotify is expected to go public at a valuation of ~$20b.