Rdio — The Streaming Service Critics Adored and Spotify Buried

Rdio was a beautifully made music-streaming service that almost everyone who used it admired, and on December 22, 2015 it was discontinued because admiration does not pay royalties. Launched on August 3, 2010 by the Skype founders Niklas Zennström and Janus Friis, Rdio married a large licensed catalog to an interface widely judged the best in the category — clean, fast, with social features that let listeners follow each other and see what friends were playing. It reviewed brilliantly. Entertainment Weekly called it the best app and online interface in streaming. For five years it was the connoisseur’s choice.

It was also, the whole time, losing the only race that mattered. Spotify launched in Europe a year before Rdio and reached the United States in mid-2011, and from there it simply outspent, out-marketed, and out-grew its more elegant rival on every axis that compounds in a network business. Rdio raised serious money — reported at well over $100 million, against the more than $200 million its backer Janus Friis poured in across its life — and still could not buy the scale that Spotify’s marketing, free tier, and partnerships were assembling. By the end, Rdio reportedly had fewer than 200,000 paying subscribers.

The economics were unforgiving. By 2015 Rdio was reportedly spending around $3.5 to $4 million a month, mostly on payroll, against roughly $1.5 million in monthly revenue — losing some $2 million a month with no path to closing the gap. When it filed for Chapter 11 bankruptcy on November 16, 2015, court documents listed about $188.5 million in secured debt. The company that built the best product in streaming was, by every financial measure, a failure.

The end was a managed transfer rather than a collapse into nothing. Pandora agreed to buy Rdio’s technology and intellectual property for $75 million in cash, hiring roughly a hundred of its employees to accelerate Pandora’s own subscription ambitions; the deal closed on December 23, 2015, and the Rdio service went dark the day before. Rdio is the catalog’s clearest case of a hard truth founders hate to hear: in a market governed by network effects and the deepest war chest, the best product does not always win.