On Monday, Pandora (NYSE: P) announced that it will pay streaming music service Rdio $75 million to acquire technology to launch its own on-demand, streaming-music subscription service. According to Advertising Age, this acquisition will allow Pandora to be more competitive with Spotify and Apple Music, which both offer radio and on-demand streaming music services.

Pandora is acquiring the assets, but not in a traditional purchase, says TechCrunch. Pandora CEO Brian McAndrews explains why during the investor conference call on Monday:

“This would have been a drain for us, and [Rdio] is financially challenged,” he said. “Those are the two reasons we did not acquire the business but did buy the technology IP. It will be late 2016 [before we launch] but that’s all we can say at this point.”

As part of the deal, Rdio is filing for bankruptcy in the U.S. Bankruptcy Court for the Northern District of California. If the court approves the bankruptcy, Rdio will shut down its service in all markets, though when that will happen has not been announced. In addition to acquiring technology and intellectual property from Rdio, Pandora will offer jobs to key members of the Rdio team.

There is no guarantee the deal will be approved though. In fact, according to TechCrunch, Rdio said it is “required to entertain competitive offers during the bankruptcy process…”

Rdio commented about the sale on its blog:

Pandora CEO McAndrews explains that the acquisition is part of the company’s growth strategy:

“Whether streaming through radio, on-demand or in-person at live events, Pandora is building the definitive source for fans to discover and celebrate music,” said McAndrews in a press release. “Wherever and however fans want to hear music, we intend to be their go-to destination.”

“We are defining the next chapter of Pandora’s growth story. Adding live music experiences through Ticketfly was a transformative step. Adding Rdio’s impressive technology and talented people will fast-track new dimensions and enhancements to our service. I couldn’t be more optimistic about Pandora’s future and the future of music,” said Andrews.

If the deal goes through, Pandora listeners can expect an “expanded Pandora listening experience” in late 2016.

Insider Take:

The announcement comes less than a month after Pandora released its third quarter financials. Though revenue was up 30% or more in every category, Pandora’s stock took a hit because it missed analysts’ revenue projections by $1.4 million. Advertising Age said the sale was prompted by Pandora’s escalating content acquisition costs which were $211.3 million for the third quarter. In contrast, Pandora’s ad revenue was $254.7 million.

Because Rdio is shutting down, it will not be transferring its listeners or their subscriptions directly to Pandora, though Pandora would be smart to develop a marketing strategy, including an introductory offer, to make a switch attractive.

For a struggling Rdio, this is probably a good option, though it is far from a done deal. In the meantime, Pandora needs to figure out how to best utilize Rdio’s assets and its acquisition of Ticketfly to better compete with Spotify and Apple Music. Pandora’s goals are likely to include ways to increase advertising revenue to more substantially offset content acquisition costs and a strategy to convert Rdio users into Pandora subscribers.