Why is Spotify developing Pandora-like-radio when it already has Pandora-like-radio?

I’m confused by this headline, which first appeared on Bloomberg, made its way to Techmeme, and was re-reported by folks like GigaOm:

Spotify Said Developing Pandora-Like Online Radio Service

It’s not just the odd syntax. It’s the fact that Spotify already has a Pandora-like radio service which works quite well that I used all the time.

Opening up my Spotify desktop client right now I can click on the radio app. It has a station from the Brazilian legend Jorge Ben, which plays similar music. I don’t need to be in the radio app to do this. If I’m playing any artist, a radio button appears at the top of my Spotify client right next to their bio.

I like Spotify radio better than Pandora because its catalog is way deeper. I find Pandora starts repeating songs after about an hour. With Spotify I don’t have that issue.

Spotify also has an awesome feature that shows you the decades in which a certain track or album was made. You can click on that decade link and it generates a Pandora style playlist pegged to that era. Heck, that’s a feature I wished Pandora would create for years.

Aha, but here’s the rub. Bloomberg reports that, “The new format would be similar to Pandora’s, which operates like radio and is cheaper to operate because royalty rates are lower and set by Congress. The new service would start by year-end and be supported by advertising.”

So Spotify would offer a radio only version of its service supported by ads to attract freemium users? Why would that be better bait to convert paid subscribers than their current ad supported service, which offers both radio and a la carte?

The only thing I can think here is that Spotify believes it could cut costs and attract users by offering a radio only version which falls under a different kind of licensing that boosts the bottom line. But wouldn’t most radio listeners be just as quick to switch to the freemium a la carte as the paid subscription, meaning more costs for Spotify, not less?

This is all making my head hurt. Time for some Fleetwood Mac radio on my Spotify.

UPDATE: Apparently one nice thing about a radio license only Spotify would be that you get to listen to artists like Metalica and The Beatles that aren’t currently licensed by Spotify.