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Streaming service Rdio and Cumulus Media announced a partnership on Monday. This marks the second great partnership opportunity this summer for Rdio; the first being with Live Nation back in July. Being the second largest radio operator in the US with 525 station, Cumulus can offer Rdio much-needed awareness to compete with more established services like Spotify and Pandora. In exchange, Cumulus claimed a significant equity stake in Rdio’s parent company Pulser Media.

Most significantly, this deal will bring Rdio into the world of free, ad-supported streaming – a feature that has been absent from the Rdio service since its start in 2010. Currently, Rdio costs $5 per month for desktop streaming and $10 per month for phone and tablet access. While Rdio does offer a free trial, it cannot compare to the free versions of Spotify and Pandora. Cumulus boasts 1,500 sales agents around the country and will use this power to sell commercials for the new, free Rdio streaming service. The two companies will share in the advertising revenue. Rdio’s free version is expected to launch at the end of 2013 though the details of the service are still not clear.

“The biggest challenge we face is really awareness,” Mr. Larner said. The company has obviously been trying to address this concern with its partnership with Live Nation. Everyone is talking about streaming, but usually the only services that get a mention are Pandora, Spotify, and now the new iTunes Radio. With 525 stations across the US, Cumulus can promote Rdio to hundreds of thousands of music fans.

For Cumulus, the deal marks a significant step into the digital environment. In the past, they have supplied streams to Clear Channel’s iHeartRadio, but that deal was simply a “marriage of convenience,” according to Cumulus executive, Lewis Dickey. “We’re trying to be much more active in the audio ecosystem than just passively handing our streams over,” Mr. Dickey said. “That has severe limitations in terms of our ability to monetize.” Apparently, the deal with Rdio will allow Cumulus to do much more in the digital radio environment. Cumulus will certainly be creating specialized playlists for Rdio from its terrestrial radio stations.

With all the negative talk around streaming services like Spotify and Pandora this summer, it is refreshing to hear of a smaller service trying to move forward and adapt to the changing streaming environment. What are your thoughts on Rdio? Do you think partnerships are a good way forward for streaming services? Do you think streaming services be financially successful on their own?

The music subscription service, Rdio, has recently partnered with concert promoter Live Nation. As a result, Rdio will provide audio streaming on LiveNation.com and act as a sponsor for Live Nation-promoted festivals including the Sasquatch! Festival and the Watershed Music Festival. The partnership started last weekend and is part of Rdio’s efforts to gain more subscribing customers.

Resulting from Rdio’s recent partnership efforts with terrestrial radios, other services like Shazam and SoundHound, and Live Nation, Rdio has managed to increase its subscriber base. This article from Billboard describes some recent subscriber trends and numbers for the music subscription service:

Embracing live music requires being both online and on-site, CEO Drew Larner tells Billboard. Live Nation’s presence in country music gives Rdio an opportunity to gain visibility in front of country music fans. “It’s a demographic we want to approach and we felt this was a great way to hit that demographic.”

The company doesn’t share specific figures on number of registered users and subscribers, but Larner gives a couple examples of its recent growth. In Brazil, registered users were up nine-fold from June 2012 through June 2013, and up six-fold from January through June. Registered users were up six-fold from June to June.

Larner also points to the ranking of Rdio’s iOS app at iTunes as an indication of the service’s upward trajectory. Rdio rose to #1 among free music apps in June in the United States after steadily ranking between #10 and #20 for much of the year. It has also hit #1 in Australia, Canada, the United Kingdom and Mexico. “We’re killing it in Mexico,” says Larner.

What’s driving this growth? Larner says four factors are behind Rdio’s growth: partnerships, social media, marketing and the product.

Partnerships have been a growing trend for some online radio and music subscription services as they search for ways to add value to the listener experience. Most services already have the capabilities to allow users to buy music they listen to, but this connection with live music may act as a more effective link between the online and the offline experience. Many would argue that downloading music and streaming music are comparable, and many consumers do not find the need to own music if they can easily stream it online from any device in any location. The live experience, on the other hand, is irreplaceable. It cannot be duplicated online or through any music service.

As users browse the Live Nation site for concert tickets, they will also be able to listen to tracks via Rdio if they are subscribers, or listen to 30 second clips if they are not.  This direct connection between music discovery and the live music industry may act as a funnel, driving new, and current fans to purchase tickets to a band’s live show. If this driver proves effective, artists stand to benefit more than they would from a download as touring generally brings in more money. In an article by Bloomberg, Rdio Chief Executive Officer Drew Larner describes this beneficial cycle: “Marrying what we do with streaming and discovery, and promoting artists with live music, is a natural fit. A streaming service like Rdio and live concerts can be a virtuous circle.”

No official date has been set as of yet for the integration of Rdio’s services into the Live Nation site.

What do you think about this partnership? Do you think Rdio could effectively drive listeners through its service to a live show?

 

Apple’s iTunes Radio is certainly late to the game, which brings to rise questions on how they will get consumers to switch from the already established online radio services. Apple needs to know what consumers really want from an online radio service and then go about providing more value while keeping the switching costs low.

Here is an interview with Jason Herskowitz, contributor to the music platform Tomahawk, and co-founder of Hatchet Industries. He discusses iTunes Radio as it compares to its established competitors including Pandora and Songza.

Much of the critical reception of iTunes Radio has consisted of balking at its similarities to Pandora. Industry pundits and market analysts are saying that Apple isn’t being
 innovative enough; it developed a “copy cat” feature, not a game-changing product. 

What was your initial reaction to iTunes Radio?

Herskowitz: This was my question, as I’m so close and tied into this market, is: how much do the “normal” people in the world know about or have brand affinity for Pandora? And if those people do, is Apple going to have something that is unique enough to get those users to switch from what they are already doing with Pandora. Those are all the things that raced through my mind when I first heard about iTunes Radio. As I got closer and started to realize that this isn’t a stand-alone app. This is actually built within the music app itself. I started to see more of the value proposition. The fact that of the mainstream users, who many are still in their iPod or iPhone music app and hitting shuffle and listening. The fact that there is radio programming within that same app, built on top of that same catalog. Is that moving the entry point far enough upstream that it’d siphon off some of those Pandora users?

Switching Costs

With that said, do you think Apple’s goal with iTunes Radio is to get Pandora users to switch or lock-in existing users to the music app?

Herskowitz: I think that most average iTunes users have used Pandora at some point or another. So I think Apple has to be thinking a little bit about switching. Because as you know and I know, and everybody else knows, the fact that all of the normal people that we know, that are not in this industry, are all generally aware of Pandora and have used it at least once and some of them very often. So I think Apple does need to think about getting those users to switch. Obviously, those that haven’t switched yet, or don’t know about Pandora yet, then great, they can get in there as well. But iTunes Radio is also going to help drive incremental download sales, which is of course, as Apple tries to extend the life of download sales as long as they can: this affords them the opportunity to do that. And of course, iTunes knows exactly how many iTunes downloads Pandora sells. Those are all numbers that they are very aware of, and they see how much sales Pandora drives, so they can think about: “If we can get upstream of Pandora…” There’s going to be benefits to them in the kind of longer play. Ultimately, I think Apple’s play is much more about the iAds platform than about being a music service for the sake of being a music service.

To read the full interview, visit Sidewinder.fm.

 

There has been a lot of hype this past week about Pandora and their unfair payments to artists. Both sides in this argument are  skewing the facts in their favor, and therefore creating mass misunderstanding, leaving consumers and other musicians with music on Pandora utterly confused.

I cannot help but make the connection to the Pandora’s Box myth. Pandora used innovation and creativity to lead the way to a redefined music industry, one where consumers had access to millions of songs anywhere, but unleashed conflict. This finger-pointing environment is not healthy for innovation and progression in the music industry. We need to try to learn all the facts, look at the situation from both sides, and find a way to move forward together. As we move forward, musicians cannot deny the value in online radio – it enables music to reach millions of consumers and potential fans – and streaming companies would not exist without the music. Along with all the bad things, Pandora’s Box also held the spirit of hope.

Here’s a quick recap of a few of the major finger-pointing events that occurred this past week:

* On Monday 6/24, David Lowery posted a piece where he showed he made $16.89 on over 1 million Pandora plays. Never mind that the song actually grossed over $1300, David wished to make his point by highlighting his songwriting revenue only. The issue gets muddled when you realize he only pointed out his songwriting share, not his publishing share as well, and that his take is only 40% of the writing, which he can’t blame Pandora for. David didn’t hide this skewing of the data, but his headline-generating writing style got respected blogs like Gizmodo and AV Club to write articles making it sound like that’s all the money he made. This forced a round of retraction articles later in the week. I can get behind the reasoning David made in the article (to stop Pandora from suing PROs to lower rates) but by obscuring the issue, he weakened the overall position.

* On Wednesday 6/26, Tim Westergren had to acknowledge the growing blogstorm and post a response about how much they do indeed pay and how they are not trying to reduce rates. Tim also chooses words carefully to make Pandora appear more altruistic than they’ve been. By saying that Pandora has not advocated an 85% rate decrease, it makes it seem that they’ve not positioned for lower royalties. But what (former) Pandora CEO Joe Kennedy did do was advocate in front of Congress for the Internet Radio Fairness Act. In a summary by bill sponsor Senator Ron Wyden, the bill “would treat Internet Radio, for purposes of establishing royalty rates, in the same way that satellite and cable radio are treated.” Currently, satellite radio is paying 7.5% of revenue to royalties. Pandora has claimed they currently pay over 50% of revenue. Cutting 50% of their revenue down to 7.5% is an…85% rate decrease. While this bill may be dead, that doesn’t mean the 85% reduction is the result of an RIAA misinformation campaign.

* On Thursday 6/27, David Israelite, the President and CEO of the National Music Publishers Association (NMPA), entered his opinion about the misinformation campaign by Pandora. He cited figures from both the Lowery argument and an event the NMPA held the previous year highlighting the paltry royalties the songwriters are getting. As he puts it: “By any standard, this is unacceptable.” That’s not entirely true because all this suggests is that Pandora is not paying a fair rate instead of a fair market rate, which is a different beast. By not comparing Pandora’s royalties to anything, these rates will naturally appear low. But you need an apples-to-apples comparison to know if anything is truly fair or not.

OK, so what is the truth of this argument? We need to have this so we can move forward with actual intellectual discussions that are as fair as possible to all sides.

To read the full post, visit Hypebot.

Apple announced its long anticipated online radio last month. The free version, iTunes Radio, and the ad-free paid version, iTunes Match, will be available to consumers and music fans later this year. Apple’s iAd will be supporting the free service. As a company known for innovation and market disruption, seeing a model so similar to Pandora’s is a little anticlimactic. Apple’s lack of success and interest in the advertisement market also raises some questions about their model. However, while it seems like Apple is late to the game and that their model is similar to that of the struggling Pandora, a deeper look shows some key differences on which Apple is betting their success.

Granted, many of Apple’s recent iTunes endeavors like Ping have not been wildly successful. Ping was installed on hundreds of millions of devices and was easily available to consumers, but if the product is not good, this does not matter. iTunes radio will most likely take a similar approach. Through iTunes, the iPod, and the iPad, Apple has an enormous customer base to which it can push this new service. However, in order to get people to switch from their current streaming service, there must be minimal switching costs – it must be easy to understand, intuitive, and clean.

Similar to Ping, iAd has not currently gained the traction it needs to support an online radio. In the past, iAd has had a difficult time attracting and holding on to top brands for advertisements. The service previously offered little control over where the ad was placed, costed more than rival services, and had a reach limited to Apple’s mobile products. It will be interesting to see how Apple adapts this service to support the online radio.

The radio service itself may be enough to attract the high-paying advertisers they need. The iTunes Store has gathered data on millions of consumers for years. Data on what genre of music they purchase, what bands they like best, how much money they spend on music and other recreational goods, what movies they watch, what books they download, and what apps they have downloaded and use. With this information, Apple can offer advertisers extreme consumer targeting based not only on demographics, but psychographics as well.

Other than data, Apple has good relations with more record labels. Because of the importance of the iTunes Store in today’s music economy, Apple has secured more robust licensing agreements with the majors, allowing Apple to potentially reach more people in more countries with more music than Pandora or Spotify.

As implied by the services names, iTunes Radio and iMatch will be heavily integrated with the iTunes store. Listeners will be able to purchase music heard on the radio and the music discovery mechanism will most likely be based on a mixture of listening information and data from the listener’s iTunes library preferences. Again, the huge amount of data Apple has been able to collect over the years may help them produce a more intuitive recommendation and discovery method.

To see an in-depth overview of the royalty calculations for Apple’s online radio services, check out this article from Billboard.

Of course, at this point, the potential success of Apple’s online radio is all speculation. It will be interesting to see what Apple can bring to the table in terms of innovation in this difficult market. The price for iTunes Match is currently set at $24.99 per year, as compared to Pandora’s $36.99 yearly fee.

As of May 2013, Pandora has 70.8 million users and Spotify has 24 million. What do you think about Apple’s online radio? Will it disrupt the market, or are they too late coming into the game?