Pandora Media Inc on Monday said it is acquiring technology and intellectual property from Rdio Inc and is to add new features to its Internet music streaming service by late next year.
The US$75 million cash deal depends on Rdio seeking bankruptcy protection and gaining court approval for the deal. Rdio is to wind down its service.
The deal with Rdio would be the second big purchase by Pandora following its agreement to buy ticket seller Ticketfly Inc last month for US$450 million.
Chief executive officer Brian McAndrews said that Pandora wants to redefine itself. It is primarily a US service known for its Internet radio. McAndrews wants to make it a global operation, add live events and give users more control.
Services like Spotify Ltd that let users request specific songs typically cost US$10 a month.
Pandora radio is free, but displays ads, which users can strip out by paying a monthly fee of US$5.
The deal also follows steps the company has taken to repair its frayed relationship with the music industry.
Earlier this month, Pandora reached a direct licensing deal for songwriting rights with Sony/ATV, the largest music publisher in the world. It settled a lawsuit for US$90 million last month over songs from before 1972. It also suspended a plan to use a South Dakota radio station to lower its royalty payments and agreed to retroactive pay to artists.
A more collaborative relationship with music makers puts it in a stronger position to expand, McAndrews said.
Pandora shares rose 3 cents to US$13.45 in after-hours trading.
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