Pandora will be raising its monthly subscription price by $1 starting in May due to increasing cost of operations that includes licensing fees.
The music streaming service will soon cost $4.99 a month, The Washington Post blog reported via the official Pandora announcement. People who are already subscribing to the premium streaming service will keep the $3.99 rate for now.
Pandora has 3.3 million paid subscribers and 250 million total registered users, according to the company.
The service will also no longer be available at the annual rate of $36, changing to a monthly option only.
Pandora cited costs of royalties as an impetus behind the change. Royalty rates that go to artists through SoundExchange have risen 53 percent in the past five years and are expected to increase 9 percent more next year, according to the Pandora blog.
The streaming service will continue to offer free, customizable listening stations with ads.
Even if users decide to go back to the free streaming option, Pandora will still make money, a report from CNNMoney noted.
Subscription fees brought in $52 million in 2013, only accounting for 12 percent of Pandora's total revenue last year, according to CNNMoney's analysis of the 2013 report.
The company actually makes more profit from users who listen to ads, compared with paid subscribers, Laura Martin, a senior analyst at Needham & Company, told CNNMoney.
"That subscription price needs to go up because the value of an hour of advertising is rising," she said. "Raising the price closes the gap of what that person is worth in an ad-driven world."
Pandora's competition, which includes Spotify, iHeart Radio and Rhapsody, continues to grow as streaming services like Apple's iTunes Radio and Beats Music come into the mix.
Despite the rise of similar services, Pandora is still the leader among its competitors and posted a $9 million profit last quarter, its largest since going public in 2011, according to The Washington Post blog.
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