This, as a result of a convergence of factors: the popularity of free mobile radio apps; the recent acquisitions by News Corp. of imeem Inc. and iLike.com, to be incorporated into MySpace Music; Apple ‘s purchase of Lala.com (however it is shutting down 5/31); the release of Slacker 3.0; and newcomer GOOM Radio.
SNL Kagan published an updated 2010 analysis of the Internet Radio space, including a table of major providers ranked by average monthly Unique users. The table also contains info such as number of stations for each player, business model (free ad supported or subscription), music download capability, song library, mobile application and reported 2009 revenue, if available.
While the major radio broadcast names such as CBS Radio and Clear Channel Radio are receiving the bulk of Internet radio ad revenues, on the strength of their well-established local audiences, Pandora has shown it can be profitable without the tower component, doubling its revenues and audience in 2009.
According to the Arbitron-Edison Research Infinite Dial 2009 study released April 8, Kagan notes the weekly average online radio audience remained steady at 17% of the age 12+ U.S. population through 2/10. After growing from 33 million in 2008 to 42 million in 2009, the online radio audience has leveled out as broadband penetration among those who have Internet access has matured at 84%.
The study also revealed that the percentage of monthly online listeners streaming Internet-only stations has overtaken the percentage listening to AM/FM stations’ simulcast streams, at 55% versus 40%.
In terms of 2009 annual revenues for the online radio sector, the RAB reported digital radio revenues among the broadcasters were up 13% to $480 million as total radio ad revenues for the period were down 18%.
Pureplay Internet radio revenues are estimated to be less than half the radio station online totals, with Pandora the largest of the group after more than doubling its listener base through the success of its mobile apps as well as through partnerships with over-the-top TV-box and Internet-connected TV device manufacturers.
Kagan’s updated 2010 analysis is reflected in the following table:
Diversified broadcast/Internet radio group
At the top of Kagan’s ranking is CBS Interactive, which includes CBS.com, CNET.com, Radio.com, TV.com, Last.fm, CBS Powered AOL Radio and Yahoo! Launchcast, in addition to live simulcasts of its terrestrial radio stations through local Web sites and mobile apps.
CBS Interactive reaches approximately 226 million unique users worldwide each month, of which 26.4 million attributed to Last.fm, based on December 2009 comScore Inc. data, and it reported total revenues of $550 million in 2009, up from $422 million in 2008.
Purchased by CBS Corp. back in May 2007 for $280 million, Last.fm, which creates personalized radio channels based on user preferences, is available for free in the U.S., the U.K. and Germany, but requires a €3.00, or $1.35, monthly subscription in other locations after a 30-track free trial.
Last.fm’s more than 3.5 million song library is also available streaming to all Microsoft Xbox 360 owners, either on a trial basis or unlimited to Xbox Live Gold members who pay the annual subscription cost for access to multiplayer gaming and media. The link to the family TV through the Xbox 360 console also allows CBS to sell full-screen video ads, and a separate $3/month premium subscription to Last.fm allows uninterrupted streaming.
CBS Interactive has also embraced the buzz surrounding the Apple iPad with its Radio.com app, which allows access to all its streaming radio channels along with artist info and videos.
News Corp. jumped into second place in Kagan’s ranking via the purchases for its MySpace Music portal of the iLike music-discovery site for $20 million in Aug. 2009 and the defunct imeem social-media Internet radio assets for $1 million in cash in December 2009.
Imeem, which at its peak reached 25 million monthly unique users, was the first Internet radio pureplay to sign revenue-sharing deals with all four major record labels to offer free streaming, although it was never able to generate enough ad revenues and referral fees for MP3 downloads and eventually was shut down.
After the last few years losing social-media audience dominance to Facebook, MySpace — through these acquisitions and by leveraging Fox’s music-focused TV shows “Glee” and “American Idol” — has redeveloped its MySpace Music Web portal to offer streaming music, videos, artist info and upcoming concert details to its base of 70 million monthly unique users.
This comes at an opportune time, as Fox Interactive Media/MySpace ad partner Google Inc. is reportedly scheduled to make its last payment of $75 million on June 20 as part of an exclusive $900 million search ad deal made back in 2007.
CC Radio reportedly reaches 110 million listeners each week through all its radio station, online and mobile properties, including 22 million unique users a month through its iheartradio.com player, streaming more than 350 stations.
In February, according to the latest Internet Audio Top 20 Ranker from Triton subsidiary Ando Media, Clear Channel trailed only Pandora and CBS Radio, including AOL Radio and Yahoo! Launchcast, in terms of average active sessions for the Monday-to-Friday 6 a.m.-to-8 p.m. daypart, although it averages almost double the time spent listening, at 1.8 hours.
Citadel and Saga had the highest average time spent listening, at approximately 3.5 hours, showing that online simulcasts of stations tended to keep listeners streaming longer during the work week.
Clear Channel does not disclose segmented revenues for its Internet and mobile properties, but at the NAB Radio Show in September 2009, CEO Mark Mays said the segment represented roughly 5% to 10% of total revenues in 2009 and was still growing. In January, Clear Channel’s Katz Media Group stated it had sold out both the Web and mobile ad inventory for iheartradio by midmonth.
Pureplay Internet radio group
By far the largest of the pureplay Webcasters, Pandora boasts 50 million registered users, about half of whom were active streamers in the past month, and 5.8 million mobile app downloads.
At the Consumer Electronics Show in January, the company announced a deal with Ford to include Pandora in its Microsoft-developed, voice-activated Sync system in select 2010 to 2011 model vehicles.
The majority of Pandora’s $50 million in reported 2009 revenues was derived from display and banner ads through its Web and mobile player and two or three streaming 15-second spots per hour at an average CPM in the $8 to $10 range.
As a result of the new streaming music royalty rates negotiated in July 2009 with SoundExchange, Pandora reportedly reached profitability in Q4 2009.
Pandora also instituted a 40-hour monthly streaming limit, which affected 10% of its active listener base. Users have the option of paying 99 cents each month for unlimited streaming, or $36 a year for Pandora One, which includes unlimited streaming and no spot ads but has been adopted by less than 3% to 5% of active users.
On that note, RBR-TVBR asked Kagan analyst Justin Nielson, “What might be the fate of free vs. subscription-based models for pureplay internet broadcasters?” He replied: “The trend has been for internet radio pureplays like Pandora and Slacker to have both a free mostly ad supported model and then move to a premium subscription model for their heavy users. That is mostly due to the streaming music royalty fees paid to SoundExchange on a per listening hour basis. Pandora instituted a 40-hour monthly limit on its free streaming with a 99 cent fee for unlimited streaming for the month or the premium Pandora One annual $36 subscription. Slacker hasn’t yet instituted monthly streaming limits, but also offers a premium $7.50 a month model with no streaming or banner ads.”
According to founder Tim Westergren, Pandora paid roughly $28 million in radio royalties in 2009 to SoundExchange. That translates to an average of 167 million total listening hours per month for the year, using the Webcaster Settlement Act of 2009-negotiated rate for pureplay webcasters, which is either 25% of revenue or .093 cent per performance per listener, whichever is greater. That per-performance rate rises slightly to .097 cent in 2010.
Those per-performance streaming-music royalty rates are much lower than a broadcast commercial station’s online simulcast rate of .16 cent and Sirius XM Radio Inc.’s Internet streaming rate of .17 cent in 2009. That has forced some small radio broadcasters to shut down their online streams to cut costs.
Competitors for Pandora’s dominance in the pureplay Internet radio category include Slacker Radio and newcomer GOOM Radio. Slacker, launched back in 2007, has a larger, 2.4 million song library along with 100 preprogrammed stations developed by professional DJs and 10,000 artist stations, but hasn’t really been able to grow its active monthly user base past roughly half a million.
Slacker may be able to gain some market share in 2010 after heavily promoting the site at CES and launching an updated mobile app for the iPhone and BlackBerry that allows music-caching to the SD card so users don’t have to be connected to the network all the time via WiFi or 3G for playback. That upgraded service is only available to its premium subscribers, who pay $4 a month.
GOOM Radio is the newest addition to Kagan’s Internet radio ranking. Founded in France in 2008, it received an initial $16 million in venture capital in March 2009 to launch a U.S. version.
The upstart signed an exclusive ad partnerships deal with TargetSpot in September 2009 and had already gained one million registered users for its beta version.
TargetSpot, which also has partnership deals with CBS Radio, AOL Radio, Entercom, Cox Radio, Live 365, Yahoo! Music, Slacker Radio and MySpace Music, is now the largest Internet and mobile ad network, with an 83% reach, or 39 million monthly unique users, in the Entertainment – Radio category according to comScore’s March 2010 report.
Satcasters/subscription Internet radio group
The third category of Internet radio includes primarily subscription-based models offered by Sirius XM, Rhapsody (now an independent provider after the 3/31 spinoff from RealNetworks and Viacom, Napster (now part of Best Buy), Apple iTunes (along with Lala.com, which Apple purchased in December 2009) and Microsoft’s Zune Pass.
Sirius XM has a well-established base of 18.7 million subscribers, although it focuses on adding subs through its OEM models via longstanding partnership deals with automakers and charges a premium for access to its content online or via its iPhone app.
In 3/09, Sirius XM started charging an additional $2.99 monthly fee to access Internet streaming or its iPhone app. Also, in July 2009, the company began adding a U.S. music royalty fee to subscriber invoices of $1.98 a month on the base $12.95 subscriptions and 97 cents for base plans that are eligible for a second-radio discount.
CEO Mel Karmazin in Sirius XM’s fourth quarter earnings call said the company’s model was superior in terms of profitability on a listener base, at $70 per user per year for satellite radio, compared with the largest Internet radio company, which gets about $1.20 per user per or $10 to $20 per listener for terrestrial radio.
Rhapsody, Napster and Zune Pass all offer online and mobile streaming radio subscription models, although each has its differences in service and accessibility.
Rhapsody, which has a library of more than 9 million songs, recently cut its monthly subscription price to $9.99, including unlimited streaming along with optional downloads at 69 cents to $1.29 per song. It can be accessed through some Vizio Internet-enabled TVs and set-top boxes and through iPhone, iPod Touch or Android phones.
Napster currently has a $15 deal for 3 months of unlimited streaming and 15 free song downloads, which can be imported into iTunes or Windows Media Player — although it doesn’t have the same mobile accessibility as it is only available through select AT&T Inc. feature phones, not including the iPhone.
Microsoft has tried to change consumer perception of subscription music services and to compete with the overwhelming success of the iTunes marketplace with the Zune Pass, available on PCs and the Zune HD at $14.99 per month, which includes unlimited access to its 3 million-plus song library and 10 downloads a month that can be kept on the device or PC.
There are also rumors that the upcoming Window Phone 7 mobile O/S, which looks a lot like the Zune HD layout, will incorporate a lot of the same applications and, through the Zune marketplace, will let users access personalized media content on any Windows-enabled device.
While Apple’s future in the Internet radio space is unclear, as it is still making plenty of profit selling MP3 song downloads through iTunes, Lala.com’s 10-cent fee for permanent access to “Web songs” that cannot be downloaded to the device could be part of a developing “cloud” music service subscription model.
