There have been a number of recent developments in Internet Radio:

  • Pandora has filed to go public and raise $100 million
  • Spotify has concluded deals with leading U.S. record labels and announced a $100 Million equity raise
  • Rdio announced it had received $17.5 million in funding.
  • Slacker raised $3 Million in additional financing
  • Clear Channel Radio acquired cloud based music system Thumbplay

During 2010:

  • 2/26/10 MOG raised $9.5 Million
  • Grooveshark raised $3.5 Million

Internet radio takes two forms, subscription model (all you can eat for low monthly fee or pay for no ads) and advertiser supported.  There are pros and cons to both the consumer and the business model for both forms.   In general I would favor the ad supported model but Internet radio companies such as Pandora pay a significant amount in music royalties thus making the business model less attractive.

I find it ridiculous that terrestrial radio executives and Sirius/XM don’t believe that they are in competition with Internet radio or that listeners don’t want a personalized experience.   Customization can be actively managed (Pandora) or derived from one’s social media graph.  I do understand that radio groups still derive 95% of their revenue from terrestrial and this is where they need to devote the bulk of their resources.  However, they must be prepared (literally) for what is coming down the road.

When talking about music with my 16 year old son, I asked him how he learns about new music.  He had two responses; 1) Facebook (when his friends “like” a song or artist and 2) www.  The later is a site containing new artists or mixes/mashes curated by an individual.  A shift from professional curation (the PD) to crowd sourcing and opinion molders has taken place.  My son does listen to terrestrial radio in the car but he seems to already know just about every song that is being played and on only two occasions can I remember when he was excited about something he did not immediately recognize.   Of course terrestrial radio playlists are extensively tested to weed out anything he would not recognize and like.  On the way to school this morning (a 20 minute ride) I counted 72 changes of radio frequency due to commercials or monotonous jock talk.  He was searching for music.  This is a broken search function model which will be fixed in car dashboard 2.0.

XM/Sirius does have some unique content not available elsewhere (e.g. Howard Stern) that consumers are going to continue to want.  XM/Sirius is a different distribution system with the advantage being ubiquitous across the U.S.  I question whether their all-music channels can compete unless of course there is no Internet connectivity.