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If the $75-million (U.S.) transaction is approved, Rdio will wind down its brand as Pandora uses the company’s assets to steel itself against competition from sector leaders Spotify and Apple Music.

Sue Holland

Pandora Media Inc., a pioneer in discovery-focused digital music streaming, plans to acquire technology, talent and intellectual property from Rdio Inc., another streaming-music powerhouse, as Rdio seeks bankruptcy protection in U.S. court.

If the transaction is approved, Rdio will wind down its brand as Pandora uses the company's assets to steel itself against competition from sector leaders Spotify and Apple Music.

The California-based companies announced the transaction, worth $75-million (U.S.) in cash subject to purchase price adjustments, shortly after markets closed Monday.

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"We intend to be the go-to music destination, unifying the full music experience under one roof, spanning radio, on-demand and live music," Brian McAndrews, Pandora's chief executive officer, said in a conference call Monday afternoon.

Mr. McAndrews said Pandora hopes to become a leader in both "lean-back and lean-in" music listening experiences, expanding its variety of subscription offerings as early as late 2016, which would likely include an on-demand option similar to Rdio. But Pandora isn't acquiring Rdio's music licences, which means Pandora will need to negotiate new ones before it can launch a similar on-demand product under its own banner.

Profitability is a rare thing for streaming music services. In a 2014 interview with The Globe and Mail, Rdio CEO Anthony Bay said it was "still super early" to expect the company to turn a profit. "You have to get scale, but with a cost structure that makes sense." Spotify executives have said much the same. But Rdio's bankruptcy protection filing is an indication that such streaming-industry optimism has an expiration date.

Rdio is a private company. Pandora, a rare publicly traded streaming company, has turned a profit some years, but has struggled to maintain investor confidence. Its shares plunged last month after third-quarter results missed analyst expectations.

Pandora, which has 78 million monthly listeners, builds users playlists of songs they might like based on their existing tastes, and was one of the Internet's first major streaming services after launching in 2000. It has been absent from the Canadian marketplace in recent years. The on-demand-focused Rdio, which lets customers stream whatever they want from a catalogue of 30-million-plus songs, launched in 2010, including in Canada. It became one of the country's leading streaming services as the sector has matured in the past five years.

Apple Music launched this year and already has 15 million users, 6.5 million of whom pay an industry-standard $10-a-month subscription fee. Spotify, the on-demand streaming leader, has 75 million users, 20 million of whom pay subscription fees to remove ads from the service.

Both leading services have recently become more customizable, allowing users to discover new music, much like Pandora. The acquisition of Rdio gives the company a foot in both worlds – of music discovery and of on-demand listening to large catalogues of music. It also is the latest in a series of acquisitions by Pandora, which bought major ticketing company TicketFly in October, widening its portfolio of music-focused income streams.

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In a news release Monday, Rdio's Mr. Bay said, "I'm pleased that many members of the Rdio team will continue to shape the future of streaming music, applying our tradition of great design and innovative engineering on an even larger stage with Pandora."

Many members of Rdio's team will join Pandora, but Mr. McAndrews said in the conference call that Mr. Bay will not make the move, instead remaining with Rdio to wind down the business. It is also unclear how long Rdio will remain available to its subscribers. A spokesperson for Rdio did not return a request for comment by publication time.

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